[Crawl-Date: 2026-04-06]
[Source: DataJelly Visibility Layer]
[URL: https://travisbusinessadvisors.com/zh/articles/three-numbers-austin-business-owner-broker]
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title: 3 Numbers to Know Before Selling Your Business
description: Before you call a broker, know these three numbers: your SDE, your likely multiple, and your net-in-pocket. Austin business owners—here's the framework.
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---

# 3 Numbers to Know Before Selling Your Business
> Before you call a broker, know these three numbers: your SDE, your likely multiple, and your net-in-pocket. Austin business owners—here's the framework.

---

Video Guide

Watch: The Three Numbers Every Owner Should Know Before Calling a Broker

7 min

A dental practice owner in Bee Cave was convinced her business was worth $4 million. Her CPA had done a "rough valuation." Her friend who'd sold a practice in Houston got $4M. And $4 million was the number she needed to fund the retirement she'd been planning for a decade.

The problem? Her actual Seller's Discretionary Earnings came in at $380,000. At the prevailing multiple for her industry and size, the business was worth closer to $1.5 million. And after broker commissions, legal fees, taxes, and the SBA loan she'd been paying down for 12 years — her net-in-pocket was under $900,000.

That's a $3.1 million gap between expectation and reality. And it happens more often than anyone in the industry likes to admit.

Three numbers would've saved her two years of frustration. Here they are.

## Number One: Your SDE (Seller's Discretionary Earnings)

This is the single most important number in any small business sale. Not revenue. Not profit. SDE.

Seller's Discretionary Earnings represents the total economic benefit to a single owner-operator. The formula:

**SDE = Net Income + Owner's Salary + Owner Benefits + Discretionary Expenses + One-Time Expenses + Depreciation + Amortization**

Why does this matter more than revenue? Because revenue is vanity. A business generating $3 million in revenue but only $200,000 in SDE is worth dramatically less than a business generating $1.8 million in revenue with $400,000 in SDE. Buyers aren't buying your top line — they're buying the cash flow that'll pay their mortgage, fund their life, and service their acquisition debt. (For understanding why cash flow matters more than raw revenue to buyers, see "Revenue Is Vanity. Cash Flow Is Sanity. Here's What Buyers Actually Pay For.")

Here's what trips up most Austin business owners: your tax return SDE and your *actual* SDE are almost never the same number. Your CPA has spent years legally minimizing your taxable income — running personal vehicles through the business, employing family members, expensing things that are partly personal. Great for taxes. Terrible for valuation.

Every one of those items is an "add-back" — an expense that gets added back to net income because a new owner wouldn't have that expense. And the add-backs you identify (or miss) directly multiply into your sale price. Miss $50,000 in legitimate add-backs, and at a 3x multiple, you just left $150,000 on the table. (For a deeper dive into the add-backs most owners miss, see [The $200,000 Mistake: Add-Backs Your Accountant Isn't Telling You About.](https://travisbusinessadvisors.com/articles/add-backs-business-valuation-austin-seller-mistake) )

## Number Two: Your Likely Multiple

Once you know your SDE, the next question is: what will buyers pay *per dollar* of that SDE?

That's your valuation multiple. And it ranges dramatically based on your industry, your size, your growth trajectory, your location, and the quality of your operation.

For small businesses in the Austin market, SDE multiples generally fall between 2x and 4x. Some benchmarks:

- A well-run HVAC company with recurring maintenance contracts and an owned equipment yard in Round Rock might command 3x–3.5x SDE
- A dental practice in Lakeway with a strong patient base and an owned building might see 2.5x–4x SDE, depending on associate dentist production and owner dependency
- A car wash in South Austin with strong unit economics might trade at 3x–4x SDE, particularly with private equity consolidators actively acquiring in this space
- A single-location auto repair shop with high owner dependency might only get 2x–2.5x SDE

The multiple isn't a fixed number. It's a negotiation range, and everything you do (or don't do) before going to market either expands or compresses that range.

What pushes multiples higher in the Austin market right now?

- **Owned real estate.** A business with an owned building creates two assets — the business cash flow and the property. This dual value is a structural advantage that most brokers aren't equipped to handle because they only understand one side of the equation.
- **Low owner dependency.** If you can leave for 30 days and the business runs fine, your multiple goes up. If the business can't survive a long weekend without you, your multiple — and your buyer pool — shrinks.
- **Recurring revenue.** Maintenance contracts, subscription models, long-term agreements. Buyers pay more for predictable cash flow.
- **Growth in a growing market.** Austin's population hit 2.3 million in the metro area. Businesses serving that expanding base command premiums, especially from out-of-state buyers who are accustomed to paying higher multiples in markets like California or New York.
- **Clean financials.** Three years of well-documented, easily verifiable financial records. Not a shoebox of receipts and a QuickBooks file that hasn't been reconciled since 2022.

Want to see where your multiple stacks up against the national market? Quarterly transaction reports track median sale prices and revenue multiples across thousands of closed transactions. They won't replace a broker's opinion of value — but they'll tell you whether the number in your head is in the right zip code.

## Number Three: Your Net-in-Pocket

This is the number that actually matters. Not the headline sale price — the amount that ends up in your bank account after everyone else takes their cut.

And it's always lower than you think.

Say your business sells for $2 million. Here's what happens to that number before you see it:

**Broker commission:** Typically 8%–12% for businesses in this size range. On a $2M sale, that's $160,000–$240,000.

**Legal fees:** M&A attorney fees for the seller typically run $15,000–$40,000, depending on deal complexity.

**CPA and tax advisor fees:** Expect $5,000–$15,000 for transaction-related tax planning and filing.

**Outstanding debt payoff:** That SBA loan, equipment financing, or line of credit? It gets paid first from sale proceeds. If you owe $300,000 on your SBA loan, that comes right off the top.

**Federal capital gains taxes:** Long-term capital gains are taxed at 0%, 15%, or 20% at the federal level, depending on your income bracket. Most business sellers in this price range land in the 15%–20% bracket.

**State capital gains tax:** In Texas, this is zero. And that's not a small advantage. If you were selling the same business in California, you'd pay up to 13.3% in state capital gains tax. On a $1.5M gain, that's $200,000 you keep in Texas that you'd lose in Sacramento.

**Net Investment Income Tax:** If your modified adjusted gross income exceeds $250,000 (married filing jointly), an additional 3.8% tax applies to investment income, including capital gains.

So on that $2 million sale, after a $200,000 broker commission, $30,000 in legal and CPA fees, $300,000 in debt payoff, and roughly $220,000 in federal taxes — your net-in-pocket is approximately $1,250,000.

That's 62.5% of the headline price. And that's before you account for any seller financing you might carry, which means a portion of your proceeds arrives over 3–5 years rather than at closing.

## How the Three Numbers Work Together

Here's a quick framework. Grab a napkin.

1. **Estimate your SDE.** Start with your net income on last year's tax return. Add back your salary, your benefits, and every discretionary or one-time expense a new owner wouldn't incur. Be honest — both inflated and deflated numbers hurt you.
2. **Estimate your multiple.** For a rough range, use 2.5x–3.5x for most small businesses. If you're in a hot industry (HVAC, dental, car wash, self-storage) with owned real estate and low owner dependency, push toward the higher end. If you're a single-location, owner-dependent service business, use the lower end.
3. **Multiply.** SDE × Multiple = approximate enterprise value. That's your headline price.
4. **Subtract.** Broker commission, legal fees, debt payoff, taxes. What's left is your net-in-pocket.

If the net-in-pocket number supports the life you want after selling — great. You've got a realistic foundation for the conversation.

If it doesn't? That's not the end of the story. That's the beginning of a preparation plan. Because the gap between where you are today and where you need to be is almost always closeable — if you give yourself 12–24 months to close it. Clean up the financials. Reduce owner dependency. Negotiate a better lease or refinance the real estate. Capture the add-backs your CPA has been hiding. Every improvement multiplies.

## How Austin's Market Dynamics Change These Three Numbers

The three numbers framework works everywhere — but in Austin, the market conditions are forcing significant changes to how each number should be interpreted.

**SDE Recognition in a Tech-Inflated Market**

Austin's population grew 23% over the past decade, driven primarily by tech company relocations and the spillover workforce from Silicon Valley. This growth has created unusual SDE dynamics for businesses serving white-collar, high-income customer bases.

A dental practice in downtown Austin versus one in a comparable market 500 miles away might operate at nearly identical cost structures. But the downtown Austin practice serves patients with average household incomes 18% higher, and those patients accept premium pricing for comprehensive treatment. The SDE margin is structurally higher — not because the practice is better run, but because the customer base supports higher fee schedules.

This matters for valuation because it affects how conservatively you should estimate your multiple. If your SDE is elevated by market demand rather than operational excellence, a buyer moving into a less robust market (or replacing you with a general manager) won't achieve the same SDE. Sophisticated buyers account for this. Sellers who don't risk overestimating what their business is worth.

**Multiple Compression from PE Activity**

Austin's car wash market — a perfect example for this discussion — has been flooded with private equity consolidators in the past 18 months. This activity is simultaneously raising multiples for well-positioned operators (who sell to these PE groups) and compressing multiples for single-location operators with limited strategic appeal.

A single-location car wash that would have commanded 3.5x–4.0x SDE three years ago now typically trades at 3.0x–3.5x, because the PE buyers have made multiples of units mandatory for acquisition targets. Single locations are no longer attractive. That's a valuation headwind that's uniquely Austin right now.

But it also creates an opportunity: if you own that single location and you can position it as an acquisition platform — the first unit of what will become a multi-unit operator under the buyer's capital — you might command premium pricing. The multiple gets paid by viewing your business as a vehicle for expansion, not a standalone investment.

**Net-in-Pocket Advantages (Texas Tax Position)**

This is where Austin's structural advantage becomes concrete. No state capital gains tax. No state income tax. No franchise tax. For a business owner selling a $1.5 million business and netting $900,000 in proceeds, relocating to California would cost roughly $120,000 in additional state taxes on that transaction.

What this means practically: Austin business sellers should be more confident in their net-in-pocket numbers because they're not subject to the erosion that out-of-state sellers face. This is a selling point for lifestyle buyers or second-generation family business transitions — "You keep more of what you sell in Texas."

For the Bee Cave or Westlake Hills seller, this advantage is even more pronounced because the buyer pool includes high-income Californians who are acutely aware of the tax burden they're fleeing. The no-state-income-tax positioning resonates with that buyer profile.

**The Timing Question**

Austin's market is also affecting the timing of when sellers should move. The PE activity, the tech worker consolidation, and the real estate velocity all suggest that the next 18 months will be more competitive for buyers than the following period. If you're thinking about selling in the next three years, the argument for sooner rather than later is stronger than it's been in five years.

But "sooner" doesn't mean "unprepared." It means aggressive timeline for the preparation steps — getting the financial recasts completed, reducing owner dependency, documenting the add-backs — so you can launch when the market window is open.

## The Conversation That Changes Everything

Most Austin business owners carry a number in their head — what they think their business is worth. That number is usually based on a friend's experience, a CPA's rough estimate, or pure wishful thinking. And carrying the wrong number leads to one of two outcomes: you either don't sell when you should (because you think it's worth more and keep waiting), or you sell in a rush and take less than you could've gotten with preparation.

The three numbers — SDE, multiple, net-in-pocket — replace the guess with a framework. Not a precise answer (that requires professional analysis), but a realistic range that grounds every subsequent decision in reality.

You don't need to be ready to sell. You don't need to call a broker. You don't need to tell anyone. You just need to know these three numbers — because once you do, the fog lifts, and the decision in front of you finally becomes clear.

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