Methodology
How OwnerGauge's Assessment Works
The assessment produces two separate outputs — an estimated market value and a Deal Readiness score — plus a set of risk flags. They are kept separate deliberately: a valuable business can still be poorly prepared for a transaction, and a well-prepared business can still have a weaker valuation profile.
How OwnerGauge Estimates Market Value
OwnerGauge first selects the applicable market benchmark for the industry and earnings metric you report — SDE (Seller's Discretionary Earnings) or EBITDA — from its underlying benchmark records, each carrying its own evidence quality, applicability, and approved use in the calculation. Rather than shifting a single starting multiple up or down by fixed amounts, OwnerGauge positions your business within that benchmark's supported multiple range based on company-specific quality factors — your revenue trend, how dependent the business is on you, customer concentration, and how much of your revenue is recurring. A stronger profile across those factors places the estimate toward the top of the range; a weaker profile places it toward the bottom. That positioned point is then applied to your earnings figure to produce a range rather than a single number.
SDE is generally most useful for an owner-operated business because it includes the economic benefit available to one working owner. EBITDA is generally more relevant when the company has a management structure and owner compensation should be treated as a market-rate operating expense. They are not interchangeable, and a buyer may recast either figure.
This logic is entirely rule-based — there is no AI model generating your valuation. The same inputs will always produce the same output, which is what makes it explainable and testable rather than a black box.
Not sure which one applies to you? Read SDE vs. EBITDA →Why Company Size Matters
A $1M revenue, owner-operated company and a $100M revenue platform in the same industry are not comparable businesses, even though they share a category label. OwnerGauge classifies every assessment into a broad market segment by revenue — Micro, Small / Main Street, Lower Middle Market, or Middle Market — specifically so a small business is never silently compared against transaction data collected from much larger deals.
Why Buyer Type Matters
Individual buyers, strategic acquirers, private equity platforms and add-ons, family offices, and search funds all price the same business differently, because they're solving different problems. OwnerGauge's underlying benchmark data tracks which buyer population a given data point actually represents, so a multiple observed in PE-sponsored platform transactions is never silently applied as if it were representative of every buyer type.
Read more on how buyer type and size change the multiple →What Estimate Confidence Means
Every valuation result includes an Estimate Confidence label — Higher, Moderate, or Limited. This measures confidence in the underlying market data's applicability to your business, not confidence that your business is well run. A poorly prepared business can still get a high-confidence range if strong comparable-market evidence exists; a well-run business in an under-researched industry can still get a limited-confidence range. As of this writing, no industry in OwnerGauge's taxonomy has verified institutional transaction data wired into the calculator yet — every result currently caps at Moderate confidence, built from OwnerGauge's own directional research rather than a certified third-party dataset. That's stated plainly in every report, not hidden behind a score.
How Deal Readiness Is Evaluated
Deal Readiness is scored across four categories, each normalized to a 0–100 scale and combined into a single weighted score:
- Revenue Quality
- How predictable, durable, and trending your revenue is — recurring or contracted share, retention, and revenue/earnings trend over time.
- Earnings Quality
- How current, complete, and well-supported your reported earnings are — records currency, financial history, and documentation behind any add-backs.
- Transferability
- How well the business would keep running and retain its economics without you — owner hours, what happens in your absence, customer relationship ownership, and management/process depth beyond you.
- Concentration Risk
- How concentrated revenue is in your largest customer, and whether that relationship is protected.
Most weaknesses affect the weighted score in proportion to their category. Three severe conditions also place a ceiling on the headline score: unusable and stale financial records, inability to operate through an extended owner absence, or one customer representing more than half of revenue. The report still shows every category so the reason for the result remains visible.
Why Readiness Is Not Valuation
Value is an estimate of economic consideration; readiness is a diagnostic of evidence, transferability, and execution risk. Better preparation can improve buyer confidence and reduce avoidable friction, but a readiness score is not a valuation input and does not promise a higher purchase price.
Limits of a Directional Assessment
The assessment does not verify financial statements, normalize working capital, value real estate or excess assets, model debt or cash, distinguish enterprise value from equity proceeds, evaluate tax structure, or reflect current buyer demand and comparable transactions. Those questions require documents, context, current market evidence, and qualified professional judgment.
What the Assessment Is
A directional, educational tool. It's meant to help you understand your starting position — what your business might be worth, how prepared it looks for buyer scrutiny, and what would likely be worth addressing — before you engage in a formal sale process.
What It Is Not
- A certified business valuation
- A formal appraisal
- A fairness opinion
- An investment banking engagement
- Legal, accounting, or tax advice
- A guarantee of any transaction outcome or price
Every figure OwnerGauge produces is directional and based entirely on the information you provide. Submitting an assessment does not create an advisory relationship of any kind.