At Aspen Valuation, we know business value is more than just numbers. After determining Seller’s Discretionary Earnings or SDE, we apply an appropriate earnings multiple to estimate fair market value. This step is essential when supporting financing, acquisitions, or succession plans.

What Influences Earnings Multiples

For businesses earning under five million dollars annually, earnings multiples typically range from one point five to four times SDE. However, this range depends on factors like owner involvement, revenue transferability, buyer pool size, and industry barriers.

Lower risk supports a higher multiple, while higher risk leads to a lower one. These adjustments ensure buyers and lenders have realistic expectations.

Example: Liquor Store vs Dental Practice

A liquor store usually runs with little owner involvement and has a broad buyer pool. These low-risk features justify a higher multiple.

In contrast, a dental practice often relies on the owner’s active participation and has licensing limits on potential buyers. This raises risk and lowers the multiple.

Evaluating Risk Across Industries

Every industry carries unique risks. For example, customer concentration or location may matter more in some sectors than others. At Aspen Valuation, we assess these risks by reviewing financials, comparing industry benchmarks, and referencing real business sales in Canada.

Helping Canadian Buyers and Lenders

We support clients across Canada with accurate, defensible valuations. By choosing the right multiple, we help smooth the path to financing or sale while giving all parties confidence in the business’s value.