How business valuation works in Canada
Most small and mid-market Canadian businesses are valued as a multiple of SDE (Seller's Discretionary Earnings) or EBITDA. SDE is roughly net profit plus the owner's salary, interest, depreciation, amortization, and one-time or personal expenses that a new owner wouldn't inherit. It answers the question: "How much money does this business actually put in an owner-operator's pocket each year?"
What SDE multiples mean
An SDE multiple is a shorthand for how the market prices a business. A restaurant might sell at 1.5–2.5× SDE, a plumbing company at 2.2–3.2×, and a stable SaaS business at 3–6× SDE (or higher when priced on recurring revenue). The multiple reflects perceived risk and growth — the safer and more transferable the business, the higher the multiple.
What raises or lowers value
Buyers pay more for clean financials, recurring or contracted revenue, a diverse customer base, a business that isn't dependent on the owner, a trained team, transferable leases, and a track record of growth. Buyers pay less when books are cash-based or messy, one customer dominates revenue, the owner is the business, or the lease is short with no options.
When to get a formal valuation
An online estimate is a great starting point for planning. For a real sale, financing application, tax or estate work, or a legal proceeding, hire a Chartered Business Valuator (CBV) or an experienced M&A advisor. Find a Canadian business advisor →