What Your Business Is Actually Worth (And Why Most Owners Guess Wrong)

Most owners I meet in Anchorage can tell me their revenue down to the dollar. They know last month's sales, their busiest week of the year, the exact day the season turns. Then I ask what the business is worth, and the room goes quiet. What comes next is usually a number that traces back to something a buddy heard at a conference, or a multiple someone tossed out over coffee, or a gut feel built up over twenty years of hard work.

I get it. Value feels abstract when you are busy running the thing. But here is the part worth sitting with: for most owners, the business is the single largest asset they will ever hold. Research from the Exit Planning Institute puts roughly 80 percent of a typical owner's net worth inside their company. You check your credit score. You know your mortgage balance. Yet the biggest number on your personal balance sheet is often the one you have never actually measured.

You do not have to be selling anything to want that number. You just have to want to know where you stand. Here is how to think about it.

Revenue is not value

The first myth to put down is that a bigger top line means a bigger price tag. It does not. Buyers do not buy your sales. They buy your profit and the risk that sits around it.

A shop doing two million in revenue that limps to breakeven is worth less than a tidy operation doing six hundred thousand that throws off two hundred thousand in clean, provable earnings. The buyer is asking one question: what will this put in my pocket, and how sure can I be of it? That is why valuation starts with earnings, usually measured as SDE (seller's discretionary earnings) for smaller owner-run businesses or EBITDA for larger ones, not with the number at the top of your income statement.

If you take one idea from this article, take that one. Value lives in the profit line and the confidence behind it.

The "my neighbor sold for 4x" trap

Somewhere along the way, someone told you a business like yours sells for three or four times something. Maybe it was a real number. It was almost certainly missing its context.

A multiple is shorthand, not truth. Four times what? Which earnings base, before or after which add-backs? Was that business dependent on its owner, or did it run without him? One big customer or fifty? Growing or flat? Sold for cash, or on a note that may never fully pay out? Change any one of those and the multiple moves.

Pricing your business off a story you half heard is like pricing your house off a number your neighbor mentioned at a barbecue. It feels like data. It is not. The only multiple that matters is the one your specific business earns, based on your specific numbers and your specific risks.

What a real valuation actually weighs

When a business gets valued properly, the earnings figure is just the starting point. From there, the work is about risk and durability. A few of the things that move the number up or down:

How much the business depends on you personally. How concentrated your revenue is among a handful of customers. Whether earnings are steady or lurch with the season, which matters a lot in an economy like ours. How clean and provable the financials are. Whether growth is real and repeatable. How much of the value walks out the door the day you do.

None of that fits in a single formula, which is exactly why a guess and a valuation are different animals. The guess anchors on one number you like. The valuation looks at the whole picture the way a buyer, or a bank, actually would.

A number is a scoreboard, not just a sale price

Here is where this stops being about selling and starts being about running a better business.

Once you know your number and the drivers behind it, you have a scoreboard. You can see which moves actually change the value and which ones just keep you busy. Reducing your reliance on one customer, cleaning up the books, building a second in command, smoothing out the seasonal swings: none of these are only exit moves. They make the business stronger, calmer, and more profitable to own right now. The value number is simply the honest way to keep score.

The owners who track this tend to make sharper decisions for years before any transition is even on the table. They are not planning to leave. They are planning to have options.

Get the number before you need it

The worst time to find out what your business is worth is the moment you have to sell it. Health changes. A buyer knocks. Burnout finally wins. Whatever the reason, when the clock is running you have no time left to fix the things that would have raised the price.

The data says most owners still learn this the hard way, though the trend is moving in the right direction. A decade ago, fewer than one in five owners had ever had a formal valuation. In the Exit Planning Institute's most recent national research, that figure climbed to around 60 percent. The gap that worries me is generational. Among baby boomer owners, more than half plan to leave their business within five years, yet only about a quarter have actually had a formal valuation done. That is a lot of Alaskans carrying most of their net worth in an asset they have never measured, on a timeline that is already ticking.

Where this leaves you

Alaska runs on small business. The SBA counts roughly 75,980 of them across the state, more than 99 percent of all our businesses, employing over 133,000 of our neighbors. Behind almost every one of those is an owner whose retirement, whose family security, whose next chapter is tied up in a number they have never checked.

You do not need to list your business to want that number in hand. Knowing what your business is worth, and what moves it, is just good ownership. It tells you where you stand, it sharpens every decision you make between now and whenever you decide to step back, and it means the day you do have options, you will have earned them on purpose instead of finding out too late.

Start with the profit line. Get an honest read. Then keep score.

Kekama Tuiofu is the founder of Due Dilly, a readiness platform for small business owners, based in Anchorage. He brings a private-equity buy-side and operating background to the owner's side of the table.

Sources: Exit Planning Institute, National and Generational State of Owner Readiness research; U.S. Small Business Administration Office of Advocacy, 2024 Alaska Small Business Profile.