Business Valuation in Arizona: the full guide
Eddy Roche, Associate Broker, HUB AZ Brokers
I do not send a teaser number from a website form. A valuation is a worksheet. I rebuild Seller's Discretionary Earnings from your tax returns and profit-and-loss statements, then I price to what a buyer, a landlord, and a liquor transfer can actually support.
Want a quick range before we talk? The business valuation calculator applies closed-sale multiples for your industry to your SDE.
What SDE means
Seller's Discretionary Earnings is the cash a full-time owner-operator would take from the business after we put owner pay and discretionary spending back on a clean line. Buyers price most Arizona owner-operated files on that number. They do not price on last year's revenue, and they do not price on a teaser from a website form.
I rebuild SDE from the tax returns and the P&Ls. Net income is the start. Owner salary goes back in. One-time or personal items get reviewed one by one. What remains should be a number a buyer, a lender, and a landlord can sit with.
If the books mix household spend with the operating statement, we document it. I would rather do that on the worksheet than watch a buyer unwind the same items in diligence and walk.
Add-backs honestly
An add-back is an expense that goes away, or changes, when you leave. Owner compensation. A one-time legal bill. A truck that is on the books and not needed for the next owner. Personal insurance run through the company.
Honest add-backs have a paper trail. A buyer will ask for the invoice, the tax return line, or the recurring pattern. If I cannot show why the dollar comes out, it stays in the expense column. Inflated add-backs do not survive diligence. They just waste a listing term.
I do not pad the worksheet to hit a number you hoped for. I will tell you which add-backs I will defend and which ones I will not.
Multiples follow risk
The multiple is not a printed table. It follows risk. Category matters. So does how much of the business walks out when you do, how long the lease has left, whether a license transfers, and whether the books can be rebuilt without a fight.
A manager-run service company with recurring work and a transferable book is a different conversation than an owner-dependent restaurant with one year on the pad. Same SDE math. Different risk. Different buyer. Different price.
I will not publish a grid of invented multiples or a sold-count to make the page look like a report. The file in front of us sets the range. If a broker quotes a multiple on the first call without the returns, treat it as a listing pitch.
Why service businesses and restaurants price differently
Sellers ask me why a service company and a restaurant with the same SDE do not get the same offer. Three things separate them: how predictable the revenue is, how much capital the business eats, and how much of it depends on the owner.
- Maintenance agreements and standing clients: next year's work known before January
- Runs on a few trucks, tools and people
- A dispatcher, crews and contracts in the company's name
- Earns every ticket one decision at a time
- Hoods, walk-ins, a buildout tied to the lease, and the repairs
- The owner is often the chef and the face of the room
Start with the revenue. An HVAC, plumbing, or IT company with maintenance agreements and standing clients knows a good share of next year's work before January. A restaurant earns every ticket one decision at a time. A competitor opens down the street, food cost jumps, a slow Saturday turns into a slow month. Buyers pay for revenue they can count on and discount revenue they have to win again every day.
Then the capital. A restaurant carries hoods, walk-ins, a buildout tied to the lease, and the repairs that come with all of it. A buyer sees money that has to keep going back in just to stay open. A service company runs on a few trucks, tools, and people. Less reinvestment means the earnings reach the buyer faster, and lenders are more comfortable with the file.
Last, the owner. In a lot of restaurants the owner is the chef, the face of the room, and the one the catering clients call. When that person leaves, part of the business leaves too. A service company with a dispatcher, several crews, and contracts in the company's name can run while the new owner learns it. A buyer who expects to hire a manager pays one price. A buyer who expects to work the line for a year pays another.
None of this makes a restaurant a bad sale. It means the risk is different, so the price is different, and the preparation is different. On a service file I spend my time documenting the contracts and the management depth. On a restaurant I spend it on the lease, the license, and the staff who stay.
EBITDA vs SDE: which earnings number applies
SDE and EBITDA both describe earning power. The difference is who the buyer is. SDE adds the owner's pay back in because the buyer plans to take that pay themselves. EBITDA leaves a market-rate manager's salary in the expenses because the buyer plans to hire one and own the business.
- Adds the owner's pay back in
- Owner-operator buyers stepping into your job
- Service companies, contractors, restaurants, bars, small practices
- Leaves a market-rate manager's salary in the expenses
- Private equity groups, platform companies, multi-unit operators
- Larger businesses that run without the owner
Owner-operator buyers price on SDE. That is most of the Arizona market I work in: service companies, contractors, restaurants, bars, and small professional practices where the buyer is stepping into your job. Private equity groups, platform companies, and multi-unit operators price on EBITDA. They do not care what you pay yourself. They want to know what the business produces under a manager they hire.
The switch is not a line on a chart. It happens when a business gets large enough, and runs independently enough, that an investor buyer shows up next to the owner-operator buyer. Documented systems, non-owner managers, and expenses that can be separated cleanly from owner draw are what make an EBITDA buyer take the file seriously.
Mixing the two up costs sellers both ways. Price a manager-run company on SDE and you may sell it to the wrong buyer for less than an investor would pay. Price an owner-dependent shop on an EBITDA multiple you read about and the people who actually buy businesses that size will pass before the first call back. When a file sits near the line, I model it both ways and tell you which buyer pool is real for your business.
Lease, license, and transferability
A buyer is buying what they can step into. If the landlord will not assign the lease, the price is not the problem. The transfer path is. I read remaining term, options, assignment language, and personal guarantees before I treat the file as listable.
On restaurants and bars, the liquor license is often the second clock. Series 12 restaurant licenses and Series 6 or 7 bar licenses transfer through the Arizona Department of Liquor Licenses and Control. The buyer applies. You cooperate. Timing is separate from the business close. I am a broker, not a liquor attorney. I still treat the license as part of the worksheet.
Transferability is the rest of the story: staff who stay, customers who are not buying you personally, contracts that assign, and systems a new owner can run. If the business only works with you in the room, the multiple compresses. That is the buyer pricing risk.
What you get
You get a conversation grounded in your numbers. I look at the returns, rebuild SDE, and tell you what a buyer, a landlord, and a liquor transfer can support. No automated PDF. No teaser range from a form.
The form that starts that conversation is Value My Business. There is no obligation to list. If you would rather call, use the number below.
Across Arizona
I work across Arizona. Lease conversations, seasonal cash flow, and city licensing change between a Scottsdale room and a Prescott service shop. I price the file in the market it lives in.
I specialize in restaurants, bars, service businesses, and contractors. Other small-to-mid-market Arizona files come in when they fit.
More answers
The questions owners ask next.
- What is my Arizona business worth?
- Roughly your Seller's Discretionary Earnings times a multiple that follows risk. I rebuild SDE from three years of tax returns and P&Ls, then the multiple moves with the category, how much of the business walks out with you, the lease, and whether a license transfers. The worksheet produces the number.
- How much does a business valuation cost in Arizona?
- With me, nothing. The broker opinion of value is free and there is no obligation to list. A bank appraisal for an SBA loan is a separate report the lender orders later.
- Do you do business valuations in Phoenix?
- Yes. I am based at 4745 N 7th St in Phoenix and value businesses across the Phoenix metro and the rest of Arizona from there. Send the basics on the form and I review the file and call you.
- Who is Eddy?
- I am Eddy Roche, Associate Broker at HUB AZ Brokers. I work across Arizona on restaurants, bars, service businesses, and contractors.
Start with the worksheet
Send the basics on the form. I review the file and call you. Across Arizona. No obligation to list.