Every Sacramento restaurant owner I meet asks the same first question: "What's my place worth?" It's the right question — and it deserves a real answer, not a guess. After 40+ years in this business, here's the truth: your restaurant is worth what a qualified buyer will actually pay, and that number is driven by provable profit, your lease, and how transferable the business is — not your sales, and not what you have invested in it.

Let me walk you through the exact method I use.

First: there are two ways to value a restaurant

Which one applies to you depends on a single question — do the books show real, provable cash flow?

• Going-concern (earnings) value — used when the restaurant is profitable and the financials prove it. This is where most well-run restaurants land, and it's almost always the higher number.
• Asset-sale value — used when the restaurant isn't making money, or the books are too weak to demonstrate the cash flow. Here a buyer is paying for the equipment, build-out, and license, not the earnings.

The number buyers actually pay for: SDE

Seller's Discretionary Earnings (SDE) is the total financial benefit the business puts in the owner's pocket in a year. Your tax return is built to minimize profit; a valuation does the opposite — we "recast" the books to reveal the real earning power. I build it on the CABB Normalized SDE worksheet in two tiers, and the difference between them matters.

Tier 1 — what the bank sees

The SBA-recognized number is where lenders stop: net income, plus depreciation, amortization, interest, one owner's salary, and the payroll tax on that salary. I use this only to test whether the deal is SBA-financeable — it is not your price.

Tier 2 — the full picture (this is what we multiply)

On top of Tier 1, I add back every legitimate benefit that won't transfer to a new owner:

• Family members on payroll beyond their real role
• Your vehicle, and owner health, life, and disability insurance
• Retirement contributions
• Personal meals, travel, phone, and subscriptions run through the business
• One-time or non-recurring charges
• Inventory adjustments and supplier rebates
• A fair-market-rent adjustment where needed

That total is your Total SDE — and Total SDE is the number the price is built on, not the basic bank line. Getting this recast right is often worth more to your sale price than any single change you could make in the kitchen.

The multiple: why 2.2× to 3.0×

Once I have Total SDE, I apply a multiple — and for a healthy independent restaurant that lane runs roughly 2.2× to 3.0×, with about 3× at the top. Where you land inside that lane depends on how easily the business transfers to a new owner:

• Toward 3.0× — the restaurant is profitable and pays the owner well, holds a strong under-market and assignable lease, keeps clean books, and has goodwill a new owner can maintain or grow.
• Toward the bottom (or lower) — the business leans heavily on you personally, the goodwill won't transfer, the lease is short or expensive, or the numbers wobble year to year.

I anchor on your most recent full year. If last year was soft but the trend is clearly improving, I lean on that trend and your year-to-date — and I always show three years recast alongside the current YTD so a buyer sees the real story.

A worked example (illustrative only)

Say a Sacramento café reports modest profit on its tax return. Here's how a recast can change the picture:

Illustrative figures only — not an appraisal or an offer. Your real number depends on your books, lease, and market.

When it's an asset sale instead

If the restaurant isn't making money, or the books simply can't prove the cash flow, buyers stop paying for earnings and start pricing the assets. I generally start around 25% of annual sales, add the resale value of any liquor license, and adjust up for a great under-market lease or a strong location and build-out. Think of it as a floor that keeps you from handing over your equipment and goodwill for nothing.

Your lease is the #1 factor — every single time

If there's one thing that moves your number more than anything else, it's your lease. I look at rent as a percentage of revenue, and anything over about 10% is a yellow flag. Just as important: the lease has to be assignable with real term remaining, or replaceable with a new one — because a buyer's SBA lender won't fund a deal without enough runway to justify it.

If you have under a year left and you're not willing to re-sign, that has to be priced aggressively — there's very little time to market the business. If your lease is a weak spot, the best move is to address it before you list. More on lease assignments and landlords →

Don't forget the liquor license

A full Type 47 (on-sale general) license has independent market value and is usually itemized separately from the business. Depending on the county and license type, it can add meaningfully to your total — so it should never just get folded into a round number.

So — what's your number?

Honestly, no one can tell you over the phone. It comes down to your provable SDE, the multiple your specific business earns, your lease, and your license. But that's the good news: most of what drives the number is knowable, and a lot of it is improvable before you ever list. The first step is a proper recast — done confidentially, with no obligation.