How much is my small business worth in BC?

There is no price list for businesses. But most BC owners can get a sensible rough range from a few numbers they already have, then firm it up with their accountant.

The short answer

Most small owner-run businesses sell for a multiple of what the business earns for its owner each year. The multiple is often somewhere between about 1.5 and 4 times, depending on the type of business and how easy it would be for someone else to run. Our free estimate does this math in a couple of minutes, with no sign-up.

Step 1: work out what the business really earns you

Start with your profit before tax. Then add back costs a new owner would not have to pay, such as your own wages, one-time repairs or legal bills, and personal expenses run through the business. This figure is often called normalized earnings or seller's discretionary earnings. Keep notes for every add-back, because buyers will ask. Our guide to add-backs and normalized earnings walks through it.

Step 2: apply a sensible multiple

As a rough guide, these are the ranges our calculator uses. They are rules of thumb, not appraisals:

• Food and hospitality: about 1.5 to 2.5 times yearly earnings
• Retail: about 1.8 to 2.8 times
• Trades and construction: about 2.0 to 3.2 times
• Automotive: about 2.0 to 3.0 times
• Manufacturing: about 2.5 to 4.0 times

A worked example

Say you own a café in a BC Interior town. After adding back your own wages and a few personal costs, it earns you about $110,000 a year. A rough range at 1.5 to 2.5 times would be about $165,000 to $275,000. Inventory on hand is usually added at cost at closing, and the equipment's condition and the lease can move you up or down within the range. A café with a ten-year lease at a fair rent and a trained manager sits near the top. One with two years left on the lease and an owner who works every shift sits near the bottom.

What BC buyers look at

• Steady numbers over several years. Three years of clean statements matter more than one great year. If a wildfire season, a road closure or a slow tourist year hurt sales, show the whole pattern and explain it.
• Seasons. Many BC businesses are busier in summer or ski season. Monthly sales figures help a buyer plan for the quiet months.
• Your lease. High commercial rents make the lease a big part of the deal. Check the term, renewal options and the assignment clause early. See your commercial lease when selling.
• Staff who will stay. In tight local job markets a settled, trained team is worth a lot to a buyer.
• How much depends on you. If customers and suppliers only deal with you, the business is worth less to a stranger. Writing down how things are done helps.
• Licences and permits. Liquor, health and municipal licences that can be transferred or re-issued without trouble reduce a buyer's risk. See transferring contracts, licences and permits.
• Location. Metro Vancouver, Victoria and Kelowna have more buyers. In smaller towns the pool is smaller, but a local buyer, an employee or a family member may value your reputation highly.

Things that do not change the value as much as owners expect

• What you paid for the business or what you've invested in it. Buyers pay for future earnings, not past spending.
• Asking prices you've seen online. Listing prices are often higher than what businesses actually sell for.
• Equipment at replacement cost. Used equipment is usually counted at what it would sell for today, and it's often already part of the earnings-based price.

Tax and sales tax are separate questions

What a business is worth and what you keep after tax are different numbers. Whether you sell assets or shares, and how the price is split between equipment, inventory and goodwill, changes the tax result. BC also has PST rules on some business assets. Read taxes when you sell a small business and GST and PST when selling a business in BC and Alberta, then ask your accountant.

Getting a firm number

Use the rough range to decide whether selling makes sense now. Then ask your accountant, or a Chartered Business Valuator for bigger or more complicated sales. For the methods in more depth, read what is my small business worth? and EBITDA multiples explained. When you're ready, see how to sell a business in BC without a broker.