Introduction: Why Valuation Is More Critical Than Ever in 2025
Valuing a business accurately has never been more crucial. After the wild valuation surges of 2021, many markets saw a correction – by early 2025, the median valuation multiple for public SaaS companies, for example, had stabilized around 6–7× revenue, down roughly 60% from its 2021 peak. This “return to earth” in multiples means that business owners can no longer assume sky-high valuations based on boom-year comparables. In October 2023, U.S. M&A activity even saw a resurgence (over $139B in deals announced that month – the highest since mid-2019), signaling that buyers are back in the market. But they are also more cautious and selective, often demanding realistic pricing. As Bain & Company noted, strategic deal multiples hit a 15-year low in 2023 even as public market valuations remained near all-time highs. This divergence underscores how private business valuations in 2024–2025 are heavily influenced by fundamentals and buyer sentiment, not just stock market froth.
Why does this matter to you as a business owner? In the North American lower middle market (businesses with roughly $1M–$50M valuations), getting your valuation right is key. Mispricing your company can mean leaving hard-earned money on the table or scaring off serious buyers. With economic headwinds like higher interest rates and inflation, buyers in 2025 have shifted focus from purely top-line growth to profitable, stable earnings. High-quality businesses with strong growth are still in demand (more capital is flowing into strategic acquirers and private equity as investors seek stable returns). However, slower-growing or “seasoned” businesses are seeing flatter multiples – buyers expect to put in work to reignite growth, and they price deals for a solid internal rate of return (IRR).
All of this means you need a grounded, data-driven valuation now more than ever. In this guide, we’ll walk through what most owners get wrong about valuation and how to get it right. We’ll cover the five main business valuation methods (yes, there are 5 valuation methods you should know: SDE, EBITDA, revenue-based, DCF, and rule-of-thumb multiples). We’ll highlight common mistakes (like fixating on revenue or using a one-size-fits-all business valuation calculator without context). You’ll learn how different buyers – from strategic corporations to private equity to individual buyers – approach valuation in 2025. We’ll also compare the rise of AI-driven business valuation software versus traditional expert appraisals. Throughout, we’ll integrate real examples from 2024–2025 deals in SaaS, e-commerce, and content businesses to show what your business might actually be worth in today’s market.
In short, valuation is both an art and a science, especially post-pandemic. Owners who understand the science (the methods and metrics) and the art (market sentiment, buyer motivations) will be best positioned to answer: “How much is my business really worth?” Let’s dive in.
Deep Dive on Valuation Methods: SDE, EBITDA, Revenue-Based, DCF, and Rule of Thumb
It’s tempting to search “how much is a business worth with $500k revenue” and hope for a simple formula. In reality, there are multiple valuation methods, and the right approach depends on your business’s size, profitability, and industry. Here we’ll break down the five most common valuation methods and when to use each. (By the end, you’ll know what the 5 valuation methods are that every owner should understand.)
1. Seller’s Discretionary Earnings (SDE) Multiple: For owner-operated businesses (usually valued <$10M), the standard is the SDE method. SDE represents the business’s true earnings power available to a single, full-time owner-operator. It starts with net profit and adds back one owner’s salary and any personal or non-recurring expenses (perks, one-time costs, etc.) that are run through the business. The logic is that a new owner might not incur those expenses or could pay themselves differently, so those costs are added back to see the discretionary cash flow. In practice, once SDE is calculated, the business is valued at a multiple of SDE (often based on market comps or a broker’s database of deals). Small businesses typically sell for about 2×–4× SDE (with the exact multiple depending on factors like growth, niche, and risk – more on those drivers later). For instance, if your company has $200K SDE, a ballpark valuation might be $400K–$800K. Why SDE? As FE International notes, for companies with an estimated value under ~$10M, SDE is used “almost exclusively”. It paints a clearer picture of earnings for a single owner after normalizing the financials.
2. EBITDA Multiple: Larger businesses (generally >$10M valuation or with more complex structures) shift to using EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization). EBITDA is a proxy for operating profit and is the go-to metric for middle-market and larger deals where the business likely has a management team beyond a single owner. Unlike SDE, owner salaries are not added back in EBITDA – any owner salary is treated as a normal expense, because in a larger firm the owners are often shareholders not directly running day-to-day ops or can be replaced by salaried managers. EBITDA multiples tend to be higher than SDE multiples for a given business because larger companies command higher valuations. Common multiples for mid-sized businesses range around 3×–6× EBITDA (and can go higher for very attractive companies). For example, a company with $2M EBITDA might sell for 5× EBITDA = $10M if it’s solid. By H1 2024, across industries, the median M&A deal was around ~9.5× EBITDA, but that skews higher due to larger deals. In the lower middle market, EBITDA multiples often land in the mid-single digits (and depend on industry). Notably, FE International uses SDE for < $10M and EBITDA for $10M+ deals because that aligns with how buyers evaluate businesses of different sizes.
3. Revenue-Based Valuations: Sometimes valuation is based on a multiple of revenue rather than earnings. This is common in high-growth or recurring revenue tech businesses (SaaS) or other cases where current profitability is low but future potential is high. For example, fast-growing SaaS startups might be valued at X times Annual Recurring Revenue (ARR) if they are reinvesting heavily and have little profit. Public SaaS companies trade on revenue multiples, and those guide private valuations. As of early 2025, the median public SaaS was about ~7× revenue, whereas private SaaS companies typically sold for ~2×–6× revenue in 2024. Revenue-based valuations are inherently riskier – they assume future earnings will materialize. Thus, we usually see them used in cases of exceptional growth or subscription models. FE International notes that for most e-commerce businesses, SDE/EBITDA-based methods suffice, but “for some fast-growing, well-capitalized companies...investing in future growth,” a revenue and growth forecast approach can be used. In other words, if neither SDE nor EBITDA captures the value (because the company is intentionally running at breakeven or a loss to grab market share), a revenue multiple or blended approach might come into play. Example: A B2B SaaS with $5M ARR growing 100% YoY might fetch, say, 4× ARR = $20M even if it’s not profitable, whereas a no-growth software company would not get that kind of revenue multiple.
4. Discounted Cash Flow (DCF) Analysis: DCF is a classic valuation method in finance – it’s the present value of future cash flows. You project the company’s free cash flow for, say, 5+ years, and discount those cash flows (and a terminal value) back to today using a discount rate (reflecting the business’s risk, often the WACC). In theory, DCF is the most “intrinsic” valuation approach. In practice, for small and mid-sized private businesses, DCF often isn’t the primary method because forecasting a private company’s cash flow far into the future is fraught with uncertainty. DCF tends to be most useful for mature, stable businesses with predictable cash flows or when valuing long-term investments. Even FE International acknowledges that in the internet business realm, a DCF is “at best a useful data point…and at worst, redundant” for most deals, given the volatility and data limitations. Still, it’s good to understand. Buyers (especially sophisticated ones like PE firms) might run a DCF as a sanity check against multiples. If you do attempt a DCF, ensure your projections are realistic. The outcome will heavily depend on assumptions (growth rates, margins, exit multiples) and the chosen discount rate. Because of these sensitivities, many consider valuation as much art as science – which is why multiple methods are compared. Think of DCF as one tool in the kit: rarely the only one, but useful to double-check value based on cash generation capacity rather than just market multiples.
5. Rule-of-Thumb Multiples: In many industries, there are “rule of thumb” valuation formulas that owners hear about. These could be simple heuristics like “X times annual sales” or “X times monthly users,” etc. For small businesses, a common rule of thumb is a multiple of earnings (SDE) – effectively the market approach simplified. For example, one might say “restaurants sell for ~3× annual profit” or “SaaS startups at $1M ARR sell for ~4–5× ARR” as a quick rule. Some retail businesses might be valued at a percentage of revenue (e.g. 0.5× to 1× annual sales). The danger with rules of thumb is that they are averages and often ignore the specific factors of your business. They should be used as rough ballpark indicators only. A rule of thumb can be a starting point, but then you adjust for your profitability, growth, customer base, etc. For instance, two companies each doing $500K in sales could have very different values: one with 90% profit margins will be worth far more than one with 10% margins. (Profitability is critical – a business with $500K revenue and high margins is much more valuable than one with $500K revenue and slim margins. In short, don’t rely blindly on any single “magic multiple.” The five methods above often intersect – an appraiser might use a market comps approach (implied multiples from comparable sales) alongside a DCF and an asset-based check, etc., to triangulate value. A professional valuation will consider all relevant methods and then apply judgment.
Which method is right for you? It depends on your business specifics. Many valuations use a combination: determine earnings (SDE or EBITDA) then apply a multiple derived from comparable sales (market approach). Fast-growth companies might lean on revenue multiples or a DCF of future earnings. And regardless of method, factors like growth rate, customer concentration, industry outlook, and documentation quality will adjust the multiple up or down. For example, in e-commerce, most businesses fall between ~4× to 6× earnings (SDE/EBITDA) if they have solid fundamentals. A riskier business might only get 3×, while a highly defensible one might get 6× or more.
To see how these methods apply to your model, check out FE International’s detailed guide on valuing different online business models (e.g. their guide on how to value an e-commerce business covers SDE vs. EBITDA and finding the right multiple range). Understanding the methods is the first step to avoiding the common pitfalls we discuss next.
Common Mistakes Owners Make in Valuation
Even armed with methods and data, many business owners stumble when valuing their own company. It’s understandable – your business is your baby, and that emotional attachment can cloud judgment. Here are some common valuation mistakes (and misconceptions) that lower middle market owners should beware of:
Overvaluing Based on Revenue or “Potential,” While Ignoring Profit and Risk: Perhaps the #1 mistake is assuming your business is worth a simple multiple of revenue without considering profitability. For instance, saying “I made $500K in sales, so my business must be worth $500K (or more).” In reality, profitability matters far more than revenue in valuation. A company doing $500K sales with $100K profit is likely worth a multiple of that $100K profit (maybe 2–3× $100K = $200–300K in a small sale) – not a multiple of $500K sales. Similarly, owners often tout future “hockey stick” growth or a big addressable market. Buyers will certainly appreciate growth potential, but they typically won’t pay you today for results you haven’t delivered yet. Valuations in 2025 have generally shifted to emphasize stable earnings over hype. As one valuation expert put it, failing to account for wider market trends and realistic growth rates can lead to “unrealistic expectations”. In short, don’t bank on 2021-era optimism; today’s buyers run the numbers with a focus on current cash flow and achievable near-term growth.
Choosing the Wrong Valuation Method (or Misapplying It): Another mistake is picking a method that doesn’t fit your business. For example, using a public-company EBITDA multiple you read about for a very small business that should be valued on SDE will misprice the company. (A 10× EBITDA multiple might be normal for a large strategic acquisition, but a tiny $1M sale will never get 10× its EBITDA; a 2–4× SDE is more realistic. Conversely, some founders of high-growth startups might use a simplistic SDE multiple when a revenue multiple or DCF might actually capture more value (if the company is reinvesting profits for growth). The key is to use the method(s) that buyers for your size/type of business use. As noted, businesses under ~$5M revenue often go for 2–4× SDE, whereas $20M+ businesses might fetch 5–7× EBITDA or higher. If you apply the wrong multiple, you either overprice (and scare off buyers) or underprice (and leave money on the table). This is where working with a professional or experienced advisor can help calibrate the approach.
Ignoring the “Valuation Drivers” and Risk Factors: Not all $1M profit businesses are created equal – one might sell for 3× ($3M) and another for 5× ($5M) or more. Why? Buyers look at a range of qualitative and quantitative factors: growth trend, customer concentration, industry stability, recurring vs. one-time revenue, intellectual property, strength of the management team, and so on. Owners often overlook weaknesses that reduce the multiple. For example, if one customer is 50% of your revenue, a buyer will heavily discount your valuation due to that risk (because losing that customer would cut the business in half). Or if your processes are not documented and everything revolves around you, the “owner dependency” will scare buyers. Many owners also fail to normalize financials properly – not removing one-time expenses, or conversely not adding sufficient market-rate expenses – leading to a skewed profit figure. Normalization (or “recasting”) is crucial to presenting an accurate earnings base for valuation. Another common oversight is macro factors: interest rates, economic climate, and sector trends. In high-interest environments, buyers (especially leveraged buyout firms or individual buyers using loans) simply cannot pay as high a multiple because their cost of capital is higher. For example, as of 2024, with interest rates elevated, many deal valuations were tempered compared to the low-rate years. If an owner ignores these factors (“but my buddy sold his business for 6× in 2019 when money was cheap!”), they will misprice in today’s climate.
Relying Only on DIY Online Tools or Rule of Thumb: In the age of the internet, many owners start with an online business valuation calculator – punch in a few numbers, get a quick value. These tools (often powered by algorithms or AI) can be useful for a rough estimate, but they have limits. They might not account for your business’s unique strengths or risk factors, and they often use broad industry averages. We’ve seen instances where a free automated valuation was off by millions because it couldn’t factor in qualitative aspects (like a key patent or conversely an aging product line). One CPA recounts a case where a business owner used a “free appraisal” tool for a valuation that the IRS later completely rejected, resulting in a huge lost tax deduction. The lesson: If it’s important (e.g. you’re selling your life’s work), don’t only rely on a quick, free estimate – it could be very wrong. Use calculators as a starting point, then get a professional opinion to refine the numbers.
Overvaluing Due to Emotional Attachment or Anecdotes: Finally, many owners fall victim to confirmation bias. You might hear that a competitor sold for a high price and assume yours should too, without digging into why that competitor attracted such a value (maybe they had strategic IP or a buyer with special motivations). Owners also often include sentimental value in their mental math – all those late nights and hard work. Unfortunately, buyers pay for results and future prospects, not past effort or what you “feel” it’s worth. Overvaluing your business can be disastrous when you go to market: serious buyers walk away or offers come in far lower, leading to frustration. In 2024, there was a standoff in many sectors: sellers clung to 2021-era high price ideas, while buyers were cautious – resulting in a lot of no-deal scenarios. As an M&A advisory firm noted, overvaluing your business can deter buyers and lead to failed negotiations. The fix is to be objective: look at data, comparable sales, and perhaps most importantly, listen to feedback from credible buyers or valuation experts. The market value of your business is ultimately what an informed buyer is willing to pay in an open market – not what you wish it to be.
Bottom line: avoid these pitfalls by educating yourself (since you’re reading this, you’re on the right track!) and by getting an expert valuation or consultation early. A qualified business broker or valuation professional will consider all the factors above – profitability, growth, comparables, market conditions – to give you a realistic range. (Most reputable firms will do an initial valuation assessment for little to no cost – for instance, you can get a free valuation from FE International’s team to understand your ballpark value, with no obligation.) Having the right expectations is crucial before you engage with buyers.
Next, let’s step into the shoes of different types of buyers. Understanding how buyers think about value in 2025 will further help you calibrate your own valuation expectations.
Buyer Perspectives: Strategic, Private Equity, and Individual Buyers in 2025
Not all buyers value businesses in the same way. A technology conglomerate will evaluate an acquisition differently than a private equity fund or an individual entrepreneur buying their first company. As a seller, knowing these perspectives can help you position your business and understand the offers you receive. Here’s how the major buyer types in 2025’s lower middle market are looking at valuation:
Strategic Buyers: Who are they? Typically other companies in your industry or adjacent industries (think competitors, suppliers, or bigger players looking for synergies). Strategics often have a long-term view and may pay a premium for businesses that give them a competitive edge or integration benefits. In 2024–2025, strategic M&A has been quite steady– many corporates are cash-rich (or have investor backing) and seek acquisitions to drive growth, especially if organic growth is slowing. Strategic buyers often value synergies: cost savings (e.g. combining operations, eliminating duplicate costs) or revenue synergies (cross-selling products to your customer base). This means a strategic might value your business higher than it stands alone, because it’s worth more in their hands. For example, a large company might buy a smaller one to access its customer list or technology – they might pay, say, 1.5× the “financial” value because to them it’s strategic. We saw this in 2024 with deals like Publicis Groupe (an advertising giant) acquiring the influencer marketing firm Influential for $500M – likely not just for its earnings, but for its capabilities in the social media space that Publicis could amplify. However, strategics can also be price-sensitive if there’s no immediate strategic fit. In 2023, some strategic deals were delayed because of valuation gaps – sellers wanted more than strategics would pay, given those deals didn’t have the synergy or the market was down. In 2025, many corporate buyers have returned (with high stock market valuations giving them confidence and currency to do deals), but they are still disciplined. If your business fills a key puzzle piece for a strategic buyer, you might get a higher offer (sometimes expressed in a higher EBITDA multiple than a pure financial buyer would pay). If not, they’ll value you more like a financial buyer. Tip: Highlight any strategic benefits (market share, technology, talent, IP) when negotiating with this buyer type – it can justify a higher price to them.
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Private Equity (PE) Buyers: Who are they? PE firms (including search funds and micro-PE in the lower middle market) buy businesses as investments, usually aiming to improve them and sell at a profit in 5-7 years (or add them to a platform of companies). They typically focus on companies with solid cash flows and growth potential. Valuation for PE is fundamentally a financial decision: they have return targets (e.g. aiming for 20%+ annual returns), so the price they pay must allow them to hit those returns upon exit. One concept here is “multiple arbitrage” – many PE firms try to buy companies at a lower multiple and later sell at a higher multiple by growing the company or combining it with others. PitchBook data shows how deal size can affect multiples: in 2024, the median EV/EBITDA multiple for large buyouts ($1B+ deals) was ~15.5×, while for deals under $1B it was ~12.8×. That implies smaller companies trade at lower multiples, which PE sees as an opportunity. If they can grow a $50M company into a $200M company, the exit multiple might be higher simply due to scale. In 2025, PE buyers have record “dry powder” (nearly $4 trillion globally), meaning they have funds to deploy. But they have been picky: focusing on quality businesses where they can deploy operational expertise. They’ll scrutinize your EBITDA quality, add-backs, and working capital. Many PE deals also involve leverage (debt financing), and with interest rates elevated, high-debt deals are less feasible – this can cap how much PE will pay (the more they pay, the more equity vs. debt they must use, which can lower their returns). Still, well-performing businesses in resilient sectors are attracting strong interest from PE. For example, a PE firm might pay 6× EBITDA for a business and aim to improve operations and sell it for 8× EBITDA down the line. If you get interest from a PE buyer, expect a more numbers-driven valuation and perhaps an earn-out or rollover (they might want you to keep some equity). They will likely compare your valuation against other opportunities (build vs buy decisions). The good news is PE can move fast and often provide a clean exit if the numbers work. Just don’t expect a sentimental premium – it’s all about the ROI.
Individual Buyers (and Searchers): This category includes entrepreneurs, high-net-worth individuals, or small groups buying a business to operate themselves. Often, they’re buying themselves a job or an entry into an industry. Many are funded through SBA loans or personal funds. For these buyers, cash flow to owner (SDE) is usually the focus, since they might plan to replace the owner in the operations. A common rule for individual buyers using an SBA 7(a) loan, for instance, is that the business needs to generate enough SDE to comfortably service the debt and pay a decent salary. This tends to keep valuations around ~2.5–3.5× SDE for Main Street deals (under ~$1-2M value). In fact, many small business acquisitions are explicitly capped by lenders at around 3× SDE unless there’s some collateral, because banks want a coverage ratio. Individuals also vary widely in sophistication – some might overpay due to emotion (e.g. falling in love with your brand), but in 2025, many individual buyers have become more educated (thanks to content and courses on buying businesses). According to market brokers, “most small businesses are valued at 2–4× SDE”, which aligns with what individuals are generally willing to pay. If you’re selling a ~$1M online business, many buyers will be individuals or first-time fund buyers, and they will be comparing it to other opportunities (franchises, startups, etc.). They might place extra value on how hands-off the business is (a highly automated business might attract more buyers, thus higher valuation, than one that requires a 60-hour-week grind). Also, expect more seller involvement like seller financing or training periods in these deals – individuals often have limited capital and want assurance. A trend post-2020 is the rise of “search fund” entrepreneurs who raise money to buy a business in the $5M-$20M range. They act somewhat like PE but on a smaller scale. They’ll also be financially disciplined, though sometimes they stretch to win a deal if it’s their one shot. Overall, when evaluating offers, consider the buyer type: an individual might come in a bit lower on price (since they don’t have synergy or big capital leverage), but the deal might be simpler (no complex preferences like a PE fund might demand).
2025 buyer climate in a nutshell: Strategic acquirers are actively looking but careful on price unless strong synergies are present. PE firms are sitting on piles of cash but picking only the best deals (and often insisting on reasonable multiples given interest rates and risk). Individual buyers are out in force (especially for online businesses, content sites, SaaS under $10M, etc.), but they’re more savvy and value cash flow and ease of operation. One positive sign: deal volume in software and online business sales was strong in 2024 – in fact, 2024 was the second-best year ever for software M&A by deal count, and Q1 2025 started off with over 210 SaaS acquisitions, on par with late 2024’s pace. This means if you price your business right, there are buyers out there. The stalemate of 2022 (when valuations were uncertain) has eased into more clarity in 2024/25: sellers have adjusted expectations, and buyers are willing to transact at sensible prices. One expert from Empire Flippers observed that the “unrealistic expectations” of 2024 gave way to more realistic negotiations – sellers became more flexible with deal structures (like earn-outs, seller financing) to bridge valuation gaps. As a result, more deals are getting done.
For you as an owner, the takeaway is to identify your likely buyer type and understand what they value. Are you pitching a strategic narrative (sell the vision of how your company fits into theirs), or emphasizing stable cash flow and growth to a PE/financial buyer, or showcasing how someone can step in and run it with ease to an individual? Align your valuation rationale accordingly.
Now, before we conclude, there’s a hot topic we need to address: the rise of AI-powered valuation tools. Can an algorithm replace an expert appraiser? Let’s compare the approaches.
Tools vs. Experts: AI-Powered Valuation Software vs. Human Expertise
AI and big data have reshaped how business valuation is conducted in 2025. Modern valuation software can scan financials, industry multiples, and market benchmarks in seconds bringing speed, consistency, and traceability to what used to be a slow, manual process. Harvard Business Review explains how AI can make relative valuation less subjective through structured peer comparisons, and MIT Sloan emphasizes how AI is being used to enhance decision quality in finance.
Where AI Adds the Most Value
For straightforward, data-rich companies, AI tools can produce a reliable valuation baseline quickly, run multiple valuation methods simultaneously, and adapt results as market data evolves. Studies from McKinsey and Deloitte show that AI pipelines reduce latency between new data and updated estimates, enabling faster, more consistent decisions by founders and buyers. This makes AI especially valuable for early-stage planning, benchmarking, sensitivity checks, and valuation scenario analysis.
Where Human Expertise Still Matters
Valuation requires forward-looking judgment such as normalizing earnings, verifying quality of earnings, evaluating management strength, analyzing customer concentration, and navigating deal structure nuances. For regulated purposes like IRS 409A safe‑harbor valuations (for stock option pricing), tax and estate planning, or litigation, only a qualified independent appraisal will meet compliance standards. AI alone isn't sufficient.
Compliance Snapshot for Founders
- 409A Safe Harbor: Under Treasury regulations (26 CFR § 1.409A‑1), an independent appraisal conducted within 12 months of a stock grant provides a safe harbor for valuation compliance.
- SBA Programs: Valuation requirements for SBA-backed financing necessitate detailed documentation far beyond what an online tool can offer.
The optimal approach today is a hybrid one. AI handles data ingestion, market comparisons, and sensitivity modeling. Human experts then stress-test assumptions, normalize earnings, and tailor valuations based on buyer type. MIT Sloan, McKinsey, and Deloitte all highlight that blending AI with human oversight and governance achieves the best results.
Takeaway for Business Owners: AI-powered valuation software offers fast, informative baseline insights—but for accuracy, defensibility, and compliance, you still need expert validation. A smart strategy is to use AI for initial estimates and then enlist a professional advisor for deeper analysis. If you’re exploring what your business is truly worth in 2025, FE Capital offers AI-driven valuation and fundraising solutions that can scale with your needs learn more at FE Capital.
Real Valuation Examples from 2025 Deals
Theory is great – but what are businesses actually selling for in 2024 and 2025? Let’s look at some real-world examples and data points across SaaS, e-commerce, and content businesses in the lower middle market. These examples will illustrate the concepts we’ve discussed: how multiples are applied and how different factors influence ultimate deal values.
SaaS Business Sales: 2024 was a busy year for SaaS acquisitions. According to a comprehensive report, there were 3,183 private software/SaaS M&A transactions in 2024– making it one of the hottest years on record for software deals. The median revenue multiple across all those private software deals was about 2.6× revenue (average was 6.4× due to some very high outliers)[ The median EBITDA multiple was around 10.2× EBITDA for private deals. This tells us that typical private SaaS or software companies in 2024 sold for somewhere around 2–3× revenue (if growing decently) or roughly 10× EBITDA, give or take depending on growth. One example: Airbase, a corporate spend-management SaaS, was acquired by Paylocity (a larger HR software firm) in 2024 for $325 million. Airbase was reportedly doing around $70M in ARR at the time, which implies a valuation close to ~4.5× ARR – which is within the range for a strategic acquisition of a high-growth SaaS. Another high-profile SaaS exit was ServiceTitan’s IPO in 2025, which signaled public markets’ appetite for strong SaaS companies – ServiceTitan’s valuation relative to its revenue reaffirmed that the best SaaS can still command rich multiples (public SaaS medians ~7× revenue as noted). On the smaller side, FE International’s own deals show SaaS businesses with good metrics often fetch somewhere in the 4× to 6× annual earnings (or ARR) range. For instance, a B2B SaaS with $2M ARR and 20% growth might sell around 4× revenue = $8M if it has solid retention, whereas one with $1M ARR but flat growth might go closer to 2×. The key takeaway: SaaS multiples are highly sensitive to growth and retention. Investors are willing to pay more for recurring revenue and scalability (hence the premium for SaaS: SaaS firms saw ~57% higher revenue multiples than the broader software average in 2024).
E-commerce Business Sales: E-commerce valuations have evolved significantly post-pandemic. During the 2020–2021 boom, some e-com brands sold for very high multiples (as FBA aggregators like Thrasio were aggressively buying). By 2024, the market normalized. In fact, some of the big aggregators retrenched – Thrasio, the once king of Amazon brand acquisitions, faced financial struggles and even filed Chapter 11 in early 2024, illustrating how paying too high multiples for dozens of businesses can backfire. Today, buyers of e-commerce companies focus on sound fundamentals: diversified sales channels, good margins, and stable growth. What multiples are we seeing? According to industry reports, by H1 2024 the median revenue multiple for e-commerce companies was ~2.0× revenue, down from peak levels and the median EBITDA multiple about 10×. That EBITDA multiple might seem high, but remember many larger e-com businesses (with strong brands) were in that data set. For smaller owner-operated e-com stores, it’s more common to value on SDE. A typical Amazon FBA or DTC e-commerce business might sell for around 3× to 5× annual EBITDA (or 2.5×–4× SDE) in 2025, assuming it has decent growth and clean financial. For example, Private Label branded e-commerce companies often see multiples in the 3×–6× EBITDA range, per brokerage data. Let’s say you had a niche e-commerce brand doing $5M revenue, $1M EBITDA. If it’s growing and has a solid brand, a buyer (perhaps a smaller PE fund or another brand) might pay ~5× EBITDA = $5M. If it’s flat or risky, it might only get 3× = $3M. Real deal example: Empire Flippers (a brokerage) shared that in 2025 they were still selling content and affiliate sites (a type of e-commerce/advertising business) at an average of 25×–29× monthly earnings, with top quality sites at 30–34× monthly. That translates to roughly 2.5× annual profit for the best sites (since 30× monthly = 2.5 years). Pre-2020, those sites might have sold at ~18× monthly (1.5× annual), so despite a dip from peak, valuations in 2025 remained higher than pre-pandemic levels. Another anecdote: a smaller $1M/year revenue Shopify store I’m aware of sold in late 2024 for around $300K, which was roughly 2.5× its ~$120K SDE – in line with market norms for a business of that size with some growth but also a bit of owner involvement.
Content Websites and Online Businesses: Content sites (blogs, niche affiliate sites, media sites) are a big part of the lower mid-market online acquisitions. They often monetize via advertising or affiliate commissions. These are usually valued on a monthly profit multiple. As referenced above, affiliate/content sites in 2025 average around 28× monthly profit (which is ~2.3× annual) with the range perhaps 25× to 35× for most deals. If your content site nets $10K/month in profit, a rough value might be $250K–$350K depending on its age, traffic stability, etc. Real example: A tech review blog making $400K/yr profit sold in 2024 for approximately $1.1M via a private deal – about 33× monthly, because it had very stable traffic and diversified affiliate programs. Buyers in this space include both individuals and portfolio investors (like media companies or website investment funds). They heavily evaluate SEO factors, traffic trends, and content quality in addition to the financials. Content businesses can command good multiples if they have steady traffic, but volatile ones or those hit by Google algorithm updates may get lower offers.
These examples underscore a few final points: market conditions and buyer demand in 2024–2025 have been favorable for sellers who are realistic. Despite higher interest rates, many deals are happening at solid multiples because buyers have capital and see opportunity in digital businesses. The key is that those deals are getting done at rational prices. The craziness of early 2021 (when some FBA businesses sold for 6×–7× SDE in bidding wars) has cooled. One veteran broker quipped that the industry went from “easy money” times to a “more sophisticated phase” where fundamentals matter again. We see more deals structured with earn-outs or seller financing in 2025 to bridge any valuation gaps – e.g. a buyer might say “I’ll give you 4× profit, and if you hit certain growth targets, you get up to 5×,” which aligns incentives. Sellers who insist on yesterday’s high-water valuations without justification often end up not selling. Meanwhile, those who present a well-prepared business and are willing to be flexible on terms are achieving successful exits.
In summary: A realistic valuation, grounded in data and aligned with current market multiples, is likely to attract serious buyers and result in a successful sale. The numbers from recent deals show what “real worth” looks like across different models. Use these as guidelines, but remember each business is unique – your specific multiple will depend on your specific strengths and weaknesses. That’s why a personalized valuation (as we’ve emphasized) is so important.
Conclusion: Getting Your Valuation Right and Next Steps
Valuing your business is one of the most critical steps in the sale or funding process – and as we’ve seen, it can be complex, but it’s absolutely achievable with the right approach. Here’s a quick recap of what we covered, and why getting valuation right in 2025 is more important than ever:
Know your numbers and methods: We demystified the five core valuation methods (SDE, EBITDA, revenue multiples, DCF, and industry rules of thumb). Understanding these gives you a framework to assess value. Even if you’re not doing a full DCF analysis yourself, knowing what SDE or EBITDA your business can be recast to, and what ballpark multiple is reasonable, puts you miles ahead of most owners. In 2025’s market, buyers expect sellers to be financially literate about their own business’s value – it builds credibility. If you can say, “We’ve normalized our EBITDA to $2M and based on comparable sales at ~5× EBITDA we’re seeking ~$10M,” that’s music to a professional buyer’s ears (because it shows you’re reasonable and prepared).
Avoid common pitfalls: We highlighted mistakes like over-focusing on revenue, choosing wrong comps, or trusting an instant online business valuation blindly. In practice, the owners who succeed are those who combine optimism about their business’s future with pragmatism about market realities. For example, you might believe your business has huge potential (great!), but you’ll price it based on what it’s doing now plus a fair premium for that potential – not an exorbitant price that only makes sense if everything goes perfectly. This balanced mindset will not only help you set the right asking price, it will also help you negotiate in good faith, which can make deals happen faster and with less friction.
Understand your buyer: A strategic buyer might pay more, but you have to find that right strategic fit. Private equity and individual buyers have their own thresholds. We’re in a market where, thanks to high dry powder, multiple buyer types are shopping in the $1M–$50M range – from first-time individual buyers to seasoned PE firms. That’s great news for you as a seller, because a wider buyer pool can mean a better chance to get your target valuation. But it also means you should market your business appropriately to each – and have your financials and story ready for scrutiny from all angles. Knowing that a PE firm will heavily diligence your add-backs or that an SBA-backed individual will care about debt service coverage lets you prepare accordingly (e.g., you might preemptively get a Quality of Earnings report or at least ensure your bookkeeping is immaculate).
Leverage tools but trust experts: We saw that AI valuation tools are helpful for quick estimates, but human expertise remains irreplaceable for a nuanced, real valuation. By all means, play around with a valuation calculator or two (many business owners do – it’s a good starting education). But before you make a decision or go to market, get a professional valuation or at least a consultation. It could be through a reputable M&A advisor or valuation firm. Many firms (like FE International) offer free valuation consultations, which can give you an external perspective on what your business is worth and what you might do to increase its value. Remember, the cost of a proper valuation is an investment – if it prevents you from underpricing your business by even 5%, that could be tens or hundreds of thousands more in your pocket. Conversely, if it tempers an unrealistic expectation, it can save you months of wasted time on an unsellable listing. In 2025’s environment, deals are happening when price meets value – and nailing that is often where a good advisor proves invaluable.
Ultimately, your business is worth what an informed buyer will pay for it in an open market. Our goal here was to arm you with the knowledge to determine that number (or range) more accurately and avoid the missteps that many owners make. By reading this, you’re already ahead of most. The next step is to apply it: get your financials in order, consider the factors honestly (strengths and weaknesses), and perhaps most importantly, get an expert opinion to validate your valuation.
Ready to find out what your business is really worth?
At FE International, we specialize in valuing and selling lower middle market online businesses, and we’ve completed over 1,500 acquisitions for SaaS, e-commerce, and content companies worldwide. We’re here to help you navigate valuation from a free, no-strings business valuation assessment to full-service M&A advisory. Our team uses data-driven models and real market experience to give you an accurate valuation range you can trust.
Contact us today for a free valuation and personalized consultation on your business. Whether you’re planning to sell now or just planning for the future, knowing your true value is the first step to maximizing it. Don’t let misconceptions or outdated info undervalue (or overvalue) your life’s work. Get the facts, get it right – and when you’re ready, FE International’s team will be here to ensure you get the maximum value for your business in the market.
Ready to discover your business’s true worth? Get your free valuation today and make informed decisions for your future. Here’s to achieving the successful exit you deserve!