Your engineering firm is worth a multiple of the cash flow it generates for the owner, adjusted for its size and the kind of work it does. That is the plain-language answer. A common rule of thumb is 2 to 4 times Seller's Discretionary Earnings, or 5 to 7 times EBITDA, and the better and more predictable your cash flow, the higher the multiple you earn. Everything else is detail on top of that.
Most owners have never had their firm valued, and roughly 98 percent do not know what it is worth. Here is how to think about it without the jargon.
Start with cash flow, not revenue
Revenue tells a buyer almost nothing. What a buyer or a bank pays for is the cash the business puts in the owner's pocket. For smaller firms that is Seller's Discretionary Earnings, which adds your salary, perks, and one-time expenses back to profit. For larger firms it is EBITDA, earnings before interest, taxes, depreciation, and amortization. Both measure the same thing: how much the firm actually generates.
Apply the rule-of-thumb multiple
Once you know your cash flow, apply the range. Two to four times SDE, or five to seven times EBITDA, is where most A/E and surveying firms land. Where you fall inside that range depends on how strong and how repeatable the cash flow is. A firm with long-term client relationships, recurring work, and earnings that do not swing wildly year to year sits at the top. A firm dependent on one or two clients, or on the owner personally, sits at the bottom.
Why banks will not accept projections
If your firm is bought through SBA financing, a bank hires an independent third party to value it, much like a mortgage appraisal. That valuation is built on historical cash flow, not a projection of what you hope next year brings. Banks lend against what a firm has proven, so three years of clean tax returns matter far more than an optimistic forecast. This protects the buyer from overpaying and keeps the deal grounded in fair market value.
The value drivers you can move
Value is not fixed. The things that push your multiple up are the same things that make a firm easier to sell: a client base that does not depend on you personally, a second layer of leadership who can run the work, clean financials, and recurring or contracted revenue. A formal valuation starts at $5,000 or more, so many owners begin with a broker's opinion of value, similar to a comparative market analysis before listing a house.
Why this matters before you sell
If you are considering selling to your key employees, the valuation is the foundation of the whole deal. It sets what the bank will lend against and what your team can afford to pay. Knowing your number early, ideally a few years before you exit, gives you time to move the value drivers that matter. The Step-Up Legacy Plan is built on exactly this kind of grounded, bankable valuation. For more on where the ranges come from, see our breakdown of EBITDA multiples for A/E firms.