Business Valuation in Indianapolis, IN

Why a Valuation Comes First

Most owners carry a number in their head. Sometimes it came from a friend's sale, sometimes from a hope. A valuation replaces that guess with a range built from your actual results.

That range shapes everything after it. It tells you whether selling now makes sense, how much work might raise the price, and what a buyer is likely to put on the table.

It also helps if you're not ready to sell at all. Many owners use a valuation to plan retirement, settle a partner question or decide where to put their energy next.

SDE or EBITDA: Which One Applies to You

Buyers price a business on what it earns, but there are two common ways to measure those earnings. Which one fits depends mostly on size and on how involved you are day to day.

• Seller's discretionary earnings (SDE) starts with net profit, then adds back one owner's salary and perks, interest, depreciation and one-time costs. It suits owner-run companies.
• EBITDA is earnings before interest, taxes, depreciation and amortization, with a fair wage for a manager already counted. It suits larger companies with a team in place.

The difference matters. A company priced on SDE assumes the buyer steps into your role. A company priced on EBITDA assumes someone is already paid to run it, so the buyer is buying a return.

How Multiples Turn Earnings Into a Price

Once earnings are set, the price is that figure times a multiple. The multiple reflects how safe and how likely to grow those earnings look to a buyer.

There is no single multiple for a given industry. Two HVAC companies with the same profit can sell for very different amounts if one has steady contracts and the other lives on one-off jobs.

Brokers look at recent sales of similar companies, then adjust up or down for your specifics. Our guide on how to value a small business covers the math in more detail.

What Raises Value

• Clean books that tie to your tax returns, with add-backs you can document
• Revenue that repeats, such as contracts, memberships or service agreements
• A wide customer base, so no single account can sink the year
• A manager or lead staff who handle daily work without you
• Steady or rising earnings over the last three years
• Equipment in good shape and a lease with years left on it

What Lowers Value

• An owner who holds every key relationship and makes every decision
• One or two customers making up a large share of sales
• Cash that never made it onto the books, which buyers and lenders won't count
• A dip in the most recent year without a clear reason
• Deferred repairs, old trucks or equipment near the end of its life
• A lease that ends soon or a landlord who won't agree to assign it

Many of these can be fixed with time. That is the point of exit planning, which gives you a year or more to improve the numbers buyers care about.

Broker Opinion of Value vs a Certified Appraisal

A broker opinion of value estimates what the market would likely pay today. It draws on comparable sales and what buyers are actually doing, and it is built to set an asking price.

A certified appraisal is a formal report from a credentialed appraiser. Owners usually need one for estate or gift tax filings, divorce, partner buyouts or court matters.

Lenders handle their own side. On SBA-backed deals, the bank typically orders an independent valuation, so a buyer's lender will check the price on its own terms.

If your goal is to sell, a broker opinion of value is usually the right starting point. If a court, the IRS or a partner agreement is involved, ask your attorney or CPA whether you need a formal appraisal.

What to Gather Before You Ask

You don't need a perfect file to get started, but the more you share, the tighter the estimate. These are the documents a broker will usually ask for first.

1. Profit and loss statements for the last three years and year to date
2. Federal business tax returns for the same years
3. A list of add-backs: owner pay, personal expenses, one-time costs
4. A list of major equipment, vehicles and their condition
5. Your lease, or the details if you own the building
6. Revenue by customer, so concentration can be checked
7. Headcount and key roles, including who runs what

Everything you share stays confidential. Nobody contacts your staff, customers or bank as part of the estimate.

Valuation in the Indianapolis Market

According to the SBA Office of Advocacy, the Indianapolis metro had more than 212,000 small businesses in 2022. That's a deep pool of owners, and a lot of buyers watching for the right one.

Local buyers include individuals using SBA loans, regional competitors and private equity groups. Each one sees your company a little differently, which is why a realistic range beats a single number.

Getting Started

Fill out the free valuation form on this page, or call (317) 555-0186. There's no cost and no obligation to list.

When you're ready to act on the number, see how we help owners sell a business in Indianapolis.