What multiple do small businesses actually sell for?

BizBuySell's Q2 2026 Insight Report puts the average cash flow multiple at 2.7x and the average revenue multiple at 0.7x, across 2,117 U.S. businesses sold that quarter. Those are averages; the same report gives a median sale price of $349,250 and a median cash flow of $155,921.

Why does a DCF give a much higher value than the market multiple?

Small-business cash flow is usually reported as seller's discretionary earnings (SDE), which is before paying the owner. A buyer who runs the business has to pay themselves out of it. On a $155,921 SDE, setting aside $70,000 as the owner's pay and discounting the remaining $85,921 at 20% gives $429,605, close to the $420,987 that 2.7x implies.

What discount rate does a 2.7x multiple imply?

If you treat the full $155,921 SDE as the buyer's return, 2.7x implies a 37.6% discount rate with no growth and about 41% with 3% growth. Rates that high are the market pricing in both the owner's labor and the risk of a small, owner-dependent business.

Should I value my business with a DCF or a multiple?

Use both and look at the gap. A multiple tells you what similar businesses sold for; a DCF tells you what the cash flow is worth at a return you choose. If the DCF lands far above the multiple, check whether your cash flow still includes the owner's pay before trusting the higher number.

Small Businesses Sell for 2.7x Cash Flow. A 20% DCF Says 5.3x. The Owner's Salary Explains the Gap

BizBuySell’s Q2 2026 Insight Report counted 2,117 U.S. small businesses sold in the quarter, at an average of 2.7 times cash flow and 0.7 times revenue. The median business in that report had $155,921 of cash flow and sold for $349,250.

We put that $155,921 into the Small Business Valuation calculator’s DCF, using the tool’s own default 20% discount rate, 2% terminal growth and a 5-year projection. With no growth, the DCF says $821,379. That’s 5.3 times cash flow, nearly double what 2.7x pays. Either buyers are leaving money on the table, or the DCF is valuing something they aren’t buying.

The grid

Each cell is the DCF value as a multiple of the $155,921 cash flow, for a discount rate (rows) and a yearly growth rate (columns), with 2% terminal growth:

Discount rate	0% growth	3% growth	5% growth	8% growth
15%	7.25x	8.16x	8.82x	9.89x
20%	5.27x	5.88x	6.32x	7.03x
25%	4.14x	4.59x	4.91x	5.43x
30%	3.42x	3.76x	4.01x	4.41x
35%	2.91x	3.19x	3.38x	3.70x
40%	2.53x	2.76x	2.93x	3.19x

The market’s 2.7x only shows up at the bottom of the table. Solving for it, 2.7x corresponds to a 37.6% discount rate with no growth, 40.9% with 3% growth and 43.1% with 5% growth. Nobody quotes a 40% required return when they talk about buying a business, so the gap needs another explanation.

The cash flow still includes the owner’s paycheck

Small businesses under about $2 million are usually priced on seller’s discretionary earnings (SDE), not EBITDA. The IBBA’s Market Pulse survey uses SDE for deals from $500K to $2M and switches to EBITDA above that. SDE is profit before the owner’s salary and perks, because it’s what one owner-operator takes home.

A buyer who steps in has to do that owner’s job, and that labor isn’t a return on the purchase price. Take an owner’s pay out of the $155,921 first, then run the DCF at 20% with no growth at all (0% terminal growth too, so the DCF is simply the cash flow ÷ 20%):

Owner’s pay set aside	Left for the buyer’s return	DCF at 20%	Return on the 2.7x price ($420,987)
$0	$155,921	$779,605	37.0%
$50,000	$105,921	$529,605	25.2%
$70,000	$85,921	$429,605	20.4%
$90,000	$65,921	$329,605	15.7%

With $70,000 set aside, the DCF lands at $429,605, within about 2% of the $420,987 the market multiple implies. The two methods agree once they value the same thing. The $70,000 is an illustration, not a market salary for any particular business: what it should be depends on the role, the hours and the local labor market.

Where these numbers don’t apply

Averages and medians are mixed here. BizBuySell reports an average multiple but median prices and cash flows, so 2.7 × $155,921 is not the price of any actual median sale. It’s a reasonable center, not a quote.
Businesses above $2 million. Larger deals price on EBITDA, where a manager’s salary is already deducted, and the IBBA’s lower-middle-market multiples are higher. The owner-salary adjustment above doesn’t apply in the same way.
Absentee-owner businesses. If the business genuinely runs without the owner (vending routes, some franchises with a manager in place), there’s less labor to subtract and a higher multiple can be justified.
Growth that a buyer will pay for. The grid shows growth moving a DCF a lot. Most small-business buyers pay for trailing cash flow, not your forecast, which is part of why market multiples sit low.
Add-backs you haven’t verified. SDE often includes add-backs (one-time costs, personal expenses through the business) that a buyer’s diligence may reject. Every dollar removed comes off at the multiple.

What to actually do

Write down whether your cash flow figure is SDE (before your own pay) or EBITDA (after a manager’s pay). Most owner-operated businesses report SDE.
If it’s SDE, subtract what it would cost to hire someone to do your job before running a DCF.
Run the revenue multiple, the earnings multiple and the DCF side by side in the Small Business Valuation calculator, and look at how far apart they land.
If the DCF is still far above the market multiple, raise the discount rate until they meet, and ask whether you’d really accept that return yourself.
Before a real sale, get comparable sales from a broker or BizBuySell’s data for your industry and region rather than relying on the national average.

How much the business can pay you while you run it is its own question; the founder salary trap works through it. The same “two methods, one answer” check applies to public stocks in P/E vs PEG.

Run your own numbers in the Small Business Valuation calculator →