Guides for owners · 8 min read

What is my business worth? How small businesses are valued in Canada

By Colton Doan, founder of Sellvara · Updated October 30, 2026

"What's my business worth?" is usually the first question an owner asks, and the honest answer is: what a qualified buyer will pay for it. But buyers don't guess. They use a few standard methods, and once you understand them you can estimate a realistic range yourself, and see what would raise it.

Most small businesses are valued on earnings

For most Canadian small and medium businesses, value comes from the money the business makes for its owner. Buyers take a measure of yearly earnings and multiply it by a number, the multiple, that reflects how risky and how transferable those earnings are.

Value = earnings × multiple

Which earnings figure you use depends on the size of the business and who runs it.

SDE: for owner-operated businesses

Seller's discretionary earnings (SDE) is the most common measure for smaller businesses where the owner works in the business every day. It answers the question: how much does this business make for one full-time owner?

To work it out, start with your profit before tax, then add back:

• the owner's salary, wages and benefits (for one full-time owner);
• interest on business loans, and depreciation and amortization;
• personal expenses paid by the business, such as a family vehicle;
• one-time costs that won't happen again, such as a lawsuit or a major one-off repair.

These are called add-backs. They matter a lot, because every dollar of add-backs gets multiplied. But they must be real and provable. Buyers and their accountants will check them line by line, and add-backs you can't support will hurt your credibility.

EBITDA: for businesses with a management team

EBITDA stands for earnings before interest, taxes, depreciation and amortization. It's used for larger businesses that have managers running day-to-day operations, so the owner's salary isn't added back: a buyer would have to pay someone to do that job.

As a rough guide, SDE fits most businesses where the owner is essential to daily operations. EBITDA fits businesses that would keep running smoothly if the owner stopped coming in.

What multiples look like

Multiples vary by industry and by business. As a broad illustration, many owner-operated small businesses sell for roughly 1.5 to 4 times SDE, and larger businesses with management teams for roughly 2.5 to 7 times EBITDA. These are wide ranges, and where a business lands depends on the factors below.

A simple example

Say a business shows a profit before tax of $150,000. The owner pays themself $90,000 in wages and benefits, the business pays $10,000 a year for the owner's personal vehicle, and there was a one-time $15,000 repair last year.

SDE = $150,000 + $90,000 + $10,000 + $15,000 = $265,000

If similar businesses sell for 2 to 3 times SDE, a realistic range is $530,000 to $795,000. Where it lands in that range depends on the factors in the table above.

Other methods you might hear about

• Asset-based value: what the equipment, inventory and property are worth. This sets a floor, and it's the main method for businesses whose value is mostly property or equipment, such as farms or hotels.
• Revenue multiples: sometimes used as a rough rule of thumb in specific industries, but less reliable than earnings, because two businesses with the same revenue can have very different profits.
• Discounted cash flow: projecting future cash flows and discounting them back to today. Common for larger companies, less so for small ones.

Estimates vs formal valuations

A calculator or rule of thumb gives you a starting range, which is useful for planning. If you need a number you can rely on for a legal or tax purpose, such as a family transfer, a shareholder dispute or an estate freeze, you need a formal valuation from a Chartered Business Valuator (CBV).

What actually raises your price

The most valuable thing most owners can do is make the business less dependent on themselves: train a manager, document how things are done, and move key customer relationships onto the team. After that, clean financial records and a few years of steady earnings make the biggest difference. Our 12-month checklist covers how to get there.

Common questions

How do I calculate what my small business is worth?

Most small businesses are valued as a multiple of earnings. For owner-operated businesses, work out seller's discretionary earnings (profit plus the owner's pay and add-backs) and multiply it by a range typical for your industry.

What multiple do small businesses sell for in Canada?

It varies widely by industry and business. As a broad illustration, many owner-operated small businesses sell for roughly 1.5 to 4 times SDE, and larger businesses with management teams for roughly 2.5 to 7 times EBITDA.

Do I need a formal business valuation?

For planning, an estimate is often enough. For legal or tax purposes, such as a family transfer or shareholder dispute, you need a formal valuation from a Chartered Business Valuator (CBV).

Try it on your own numbers

Sellvara's free valuation calculator walks you through SDE or EBITDA, your add-backs and an industry multiple, and shows every step, so you can see exactly where your range comes from. It's a starting point, not a formal valuation, and it's a good way to start the conversation with your accountant. When you're ready, see how to sell a small business in Canada.

This guide is general information, not legal, tax or financial advice. Every sale is different: talk to your own accountant and lawyer before you decide.