What Is My Business Worth? SDE Multiples for Arizona Businesses

Most small businesses in Arizona sell for 2.5 to 5 times seller's discretionary earnings — not a multiple of revenue. A commercial cleaning company with $4M in revenue and $600,000 in SDE is typically worth $1.5M to $2.4M. Where you land inside that range depends far more on how the business is built than on what industry it is in: whether revenue is contracted, whether the business runs without you, and whether one customer is a third of the book.

That is the short answer. The rest of this explains how to get to a number you can actually defend, and where owners most often get it wrong.

The mistake almost everyone makes first

Owners usually start with revenue. "We did $5 million last year, and I heard businesses go for one times revenue, so we're worth $5 million."

Revenue multiples are a rule of thumb used in a handful of industries where margins are highly predictable — insurance books, some agencies, some SaaS. For an operating business with crews, trucks and variable margins, revenue tells a buyer almost nothing. Two landscaping companies at $5M can throw off $300,000 and $900,000 respectively. They are not worth the same amount, and no lender will treat them as though they are.

What a buyer is actually purchasing is the cash the business produces for its owner. That is what SDE measures.

What SDE is

Seller's discretionary earnings is the total annual financial benefit that one full-time owner-operator takes out of the business. It is the standard measure for businesses below roughly $5M in earnings, at which point buyers switch to EBITDA (which does not add back an owner's salary, because larger businesses are assumed to pay a market-rate manager).

To calculate it:

Start with net income from the business tax return.
Add back owner compensation — your salary, your distributions, and the payroll taxes on them.
Add back interest on business debt. A buyer will have their own capital structure.
Add back depreciation and amortization. These are accounting entries, not cash going out the door.
Add back one-time expenses that will not recur: a lawsuit, a rebrand, a bad-debt write-off, the year you replaced the roof.
Add back personal expenses run through the business: vehicles, phones, travel, health insurance, the country club, the family member on payroll who does not actually work there.
Subtract what a buyer would have to replace. This is the step almost nobody does, and it is the one that costs you credibility. If you also do all the estimating, a buyer has to hire an estimator. That salary comes back off.

Step 7 is worth dwelling on. An SDE figure with no replacement costs subtracted, in a business where the owner is doing three jobs, is not a number a buyer or a lender will accept. Adjusting it yourself before you present it is one of the cheapest credibility purchases available to you.

Multiple ranges by sector

These are working ranges for owner-operated Arizona businesses in the $2M–$10M revenue band. They are orientation, not appraisal.

Sector	SDE multiple	Why it sits there
HVAC, plumbing, electrical	3.5× – 6.0×	Service agreements plus replacement work; the most aggressively bid category in Phoenix
Pest control	3.5× – 5.5×	Recurring contracts and route density; among the most predictable revenue in home services
Security services and monitoring	3.0× – 5.0×	Monitoring RMR is valued far above guard-hour revenue
Light manufacturing and fabrication	3.0× – 5.0×	Proprietary tooling and diversified customers, offset by capital intensity
Facilities and building maintenance	3.0× – 4.5×	Contracted scopes across multiple sites
Staffing and workforce services	3.0× – 4.5×	Sticky client relationships, but margin-sensitive
Specialty distribution and wholesale	3.0× – 4.5×	Exclusive lines help; slow inventory hurts
Janitorial and commercial cleaning	2.5× – 4.0×	Contracts renew, but margins are thin and labor is the whole business
Landscaping and irrigation	2.5× – 4.0×	Maintenance contracts price well; install work does not repeat
Pool service and repair	2.5× – 4.0×	Route density and year-round billing in Phoenix
Commercial painting and coatings	2.5× – 4.0×	Repeat commercial customers and a transferable ROC license
Logistics, trucking and last mile	2.5× – 4.0×	Contracted lanes price above spot freight
Other B2B and professional services	2.5× – 4.0×	Depends entirely on whether revenue belongs to the company or to you

For national context, BizBuySell's Insight Report put the median closed-transaction sale price at $349,250 on median cash flow of $155,921 in Q2 2026 — an average of about 2.7× cash flow. That median is dominated by businesses far smaller than the ones in the table above, which is exactly why the median is lower. Size itself earns a premium: bigger businesses are less owner-dependent, more attractive to more buyers, and easier to finance.

The five things that actually move your multiple

Within a sector range, five factors do most of the work. Ranked by how much they move the number in practice:

1. Owner dependence. This is the big one. If the business cannot run for a month without you, a buyer is not purchasing a business — they are purchasing a job, plus the risk that your customers were loyal to you personally. A business with a real general manager and documented processes trades at the top of its range. One where the owner holds every relationship, quotes every job and signs every check trades at the bottom, or does not sell at all.

2. Customer concentration. If one customer is more than 20% of revenue, expect a discount. Over 30% and you are into territory where SBA lenders start asking hard questions and buyers start proposing earnouts to shift the risk back to you. This is the most common single reason a price gets cut during diligence.

3. Recurring or contracted revenue. Revenue that renews automatically is worth substantially more than revenue you have to win again every January. A pest control company with 3,000 quarterly service agreements and a landscaping company doing $4M in one-off installs may report identical SDE and sell two full turns apart.

4. Financial quality. Not how profitable — how verifiable. Accrual-basis books, a clean chart of accounts, and returns that tie to your P&L shorten diligence and eliminate the buyer's uncertainty discount. Books that require three months of reconstruction do the opposite, and every week of delay is a week in which a buyer can talk themselves out of the deal.

5. Trend. Three years of growth supports the top of the range. Flat is workable. Declining means the conversation becomes about which year's earnings are representative, and buyers will argue for the worst one.

Notice what is not on this list: how hard you worked, what the business meant to your family, or what you need in order to retire comfortably. Those are real, and they matter enormously to you. They do not appear anywhere in a buyer's model, and a valuation that includes them will not survive contact with a lender.

What a multiple does not tell you

The multiple produces an enterprise value. That is not what lands in your bank account.

Working capital. Most deals are struck on a "cash-free, debt-free" basis with a normal level of receivables and inventory delivered at close. Deciding what "normal" means is a real negotiation over real money, and it is often six figures.
Deal structure. $3M with $2M cash at close and $1M in a five-year seller note is not the same offer as $2.8M all cash. Compare offers on cash at close and risk-adjusted total, never on the headline.
Real estate. If you own the building, it is a separate asset with a separate value and usually a separate lender. Do not let it get folded into the business price without being priced on its own.
Taxes. Asset sale versus stock sale, and the allocation across asset classes, can move your after-tax proceeds by hundreds of thousands of dollars. This is a conversation with your CPA before you sign a letter of intent, not after.
Lender constraints. If your buyer needs financing, the price has to clear an independent third-party valuation and a debt-service coverage test. A price that fails either one does not close, regardless of what both parties agreed to. We wrote about how that works.

When you need a real valuation

The estimate above is fine for deciding whether to have a conversation. You need a formal, certified valuation when:

Your buyer is using SBA financing. The SBA requires an independent business valuation from a qualified source for most change-of-ownership loans above a modest threshold, and the lender orders it — you do not.
You are dividing an estate, settling a divorce, or filing anything with the IRS.
You are setting a price in a buy-sell agreement between partners.

A broker's free "opinion of value" is not any of these. It is a marketing document produced by someone who is paid when the business sells, and it is often deliberately optimistic in order to win the listing. That is not a moral failing — it is what the incentive structure produces. Read it with that in mind.

What to do next

If you want a number you can act on, three years of business tax returns and a current year-to-date P&L are enough for anyone competent to give you one. You do not need to tidy the books first, and you do not need to sign a listing agreement to find out.

Run your numbers through our estimator, or send them to us and we will rebuild your SDE line by line and show you every adjustment we made — including the ones that go against us.