How Much Is My Business Worth in Louisiana?

If you run a contracting company in Livingston Parish, a distribution business in Baton Rouge, a shop in Ascension or a service company anywhere in greater Louisiana, the way your business gets priced is not mysterious. It is arithmetic plus risk. The arithmetic is the earnings. The risk is how confident a buyer or a lender feels that those earnings continue after your name comes off the door.

How small businesses are actually valued

Below roughly a million dollars of earnings, most owner-operated businesses are priced on seller's discretionary earnings — SDE. Start with net profit on the tax return, then add back the owner's salary, personal expenses that ran through the company, interest, depreciation and any one-time costs. What you end up with is the total financial benefit one working owner takes out of the business in a year.

Larger companies, and companies with a real management team in place, get valued on EBITDA instead — earnings before interest, taxes, depreciation and amortization — because the buyer is not stepping into a job, they are buying an operation that already runs. That distinction matters more than the letters do. SDE assumes a working owner. EBITDA assumes management. The move from one to the other is usually the single largest value event in a small company's life.

Then a multiple gets applied. In practice, small owner-dependent service businesses often land somewhere around two to three times SDE. Well-run companies with documented systems, recurring contracted revenue and a manager who is not the owner can reach four times or higher, and companies valued on EBITDA at a few million in earnings go higher still. Nobody can promise you a number sight unseen, and any page that does is selling something.

Why owner-dependency lowers the multiple

Think about it from the other side of the table. A buyer looks at $400,000 of SDE in a company where the owner personally quotes every job, holds every key customer relationship, approves every purchase and is the only one who knows how the scheduling really works. What exactly are they buying? They are buying the owner's week. The day that owner leaves, some portion of that $400,000 walks out with them, and neither side knows how much.

That uncertainty gets priced. It shows up as a lower multiple, as more of the price pushed into an earn-out, as a longer transition period you are expected to work, and as a bank declining to finance the deal at all. Two businesses with identical earnings can be worth wildly different amounts, and the difference is almost never the equipment.

• —Customers who are loyal to the company rather than to you personally support a higher multiple.
• —Contracted or recurring revenue is worth more than the same dollar of one-off project work.
• —A second person who can run the day without calling you removes the biggest single discount.
• —Three years of clean, consistent financial statements that match the tax returns reduce buyer risk.
• —Concentration — one customer at 30 or 40 percent of revenue — cuts the number hard.

Why your number is usually 40–60% above the market

This is not a criticism, and it is nearly universal. Owners price on three things: what it cost to build, what retirement is going to require, and what a neighbor supposedly got for their company. Buyers price on one thing: the cash flow they can count on, adjusted for the risk of losing it. Those two methods rarely land in the same place, and the gap is commonly 40 to 60 percent.

The gap is not permanent. It is a description of the work still to be done. Every point of owner-dependency you remove, every process you write down, every customer relationship you transfer to someone who stays after the sale — that is the gap closing. Owners who spend two or three years on this are usually the ones who get a clean deal at a fair price. Owners who discover the gap the week they decide to retire have very few options left.

What this page is not

This is educational, not a valuation. It is not an appraisal, not a broker's opinion of value, and not legal, tax or investment advice. Before you sign anything, get a CPA and an attorney who handle business sales in Louisiana looking at your specific situation. What this page can do is tell you which questions a buyer is going to ask — and give you a way to find out how you would answer them today.

A better first question than "what is it worth?"

Try this one instead: could someone else own this business and still make money? If the answer is a confident yes, valuation becomes a negotiation about multiples. If the answer is no, or not yet, then the number you would get today is lower than it needs to be — and the fix is operational, not financial. That is exactly what the free Sellability Readiness Assessment measures: eight areas a buyer scrutinizes, scored, with the specific items to work on first.