Starfish Coaching · Selling Your Business
A practical guide for design and construction owners
Most construction companies are valued as a multiple of earnings. For an owner-operated firm that usually means seller's discretionary earnings, or SDE: what the business earns for one working owner before that owner's own pay. A buyer applies a multiple to that number, and the multiple is where the argument is.
Start with profit before tax. Add back what you pay yourself, then add back one-off or personal costs the business carries that a buyer would not, such as a family wage, a personal vehicle or a one-time legal bill. What is left is the SDE.
The multiple is a judgment about risk. It answers one question: how likely is it that these earnings keep arriving after you leave? The more the business depends on you, the lower the answer.
What a buyer actually pays is set by negotiation, deal structure and timing, not by a formula. Treat the arithmetic as a starting point and ask a broker or a chartered business valuator to stress it.
The two measures answer different questions. SDE assumes the buyer is an owner-operator who will work in the business, so it counts the owner's pay as part of what the business earns. EBITDA assumes someone is already paid a market salary to do the owner's job, so the earnings stand on their own.
That is why the choice tells you something. If your business only makes sense with you in it, buyers will use SDE and a lower multiple. If it already runs under a manager, buyers can use EBITDA and a higher one. Moving a business from the first to the second is most of what getting ready to sell means.
This does the arithmetic from step one and shows what a chosen multiple does to the number. It does not tell you which multiple your business deserves. That depends on everything below.
What the arithmetic says
| Multiple | Value | Against 2.0x |
|---|
This is arithmetic, not a valuation. Nothing you type here is sent anywhere.
Published ranges are wide. For small owner-run contractors they generally sit in the low single digits of SDE, and they rise for larger firms with management teams that are valued on EBITDA. The table above runs from 2.0x to 4.0x so you can see the effect, and it should be read as a set of examples rather than a forecast.
One US acquirer's 2026 analysis of construction deals (CT Acquisitions, June 2026) reports that owner involvement in estimating, project management and customer relationships holds prices down, and that recurring service revenue and crew leaders who run jobs without the owner support higher ones. It is US data from a single source. Canadian deals differ in tax treatment, deal structure and market depth, so use it for direction and take specific advice from your accountant and a broker.
Earnings are history and the multiple is a forecast of confidence. Most of what moves the multiple is hard to change quickly: your trade, your market and the size of your company. Owner dependence is different. It is the one factor an owner can work on directly, and about three years is roughly the runway it takes for that work to show up in the financials a buyer sees.
That is what the Exit Readiness Assessment is for. It scores your business across the eight fundamentals, maps every function that runs through you, and sequences the work against the date you want to leave. Owners who want to rebuild the business so it runs without them often pair it with the Self-Sustaining Business Program.
Most small construction companies are valued as a multiple of seller's discretionary earnings, which is profit before tax plus the owner's pay and any one-off or personal costs the business carries. The multiple reflects how confident a buyer is that those earnings will continue after the owner leaves.
Nobody can say without your numbers and a view of how the business runs without you. The calculator on this page shows what a chosen multiple does to your earnings, and the Exit Readiness Assessment looks at what would move the multiple. For a formal figure, use a chartered business valuator.
Published ranges are wide. For small owner-run contractors they generally sit in the low single digits of seller's discretionary earnings, and they rise for larger firms with management teams that are valued on EBITDA. Size, trade, region and owner dependence all move the number, so a typical figure says little about any one business.
Use SDE when the owner works in the business and a buyer would be buying themselves a job as well as an income. Use EBITDA when the business already pays someone a market salary to do the owner's role, so the earnings stand on their own. As a business grows and the owner steps back, buyers move from the first to the second.
Not always, but you will want one for a tax filing, a legal matter, a shareholder buy-out or to anchor a negotiation. In Canada, a chartered business valuator is the professional designation for that work. A broker can also give you an opinion of value for a sale.
Earnings that do not depend on the owner, a management team that makes decisions, revenue that repeats, customers that are spread out, clean financials and documented processes. Owner dependence is the one an owner can change on a three-year timeline.
The free Exit Readiness Scorecard takes a few minutes and shows where a buyer would push back.
Eric Lee · Starfish Coaching · 1937 Triumph St, Vancouver BC V5T 1C5
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