Every valuation conversation I have in Chattanooga opens the same way. The owner already has a number in their head, usually from a competitor’s rumored sale price or from an online calculator, and wants to know whether it is close.
Most of the time it is not, and the reason has less to do with the business than with what the number is measuring. A business is worth what a qualified buyer will pay, on terms a lender will actually approve, after tax. Those are three separate constraints, and the third one behaves differently in Hamilton County than it does twenty minutes south in Catoosa County.
This guide covers how businesses in the $1M to $15M range get valued, what the Chattanooga market specifically does to that number, and what Tennessee takes out of it before the proceeds reach you.
How Businesses in This Range Get Valued
Two earnings measures do almost all of the work, and which one applies to you is mostly a question of size and of how much of the business runs through you personally.
Seller’s Discretionary Earnings
SDE is the standard for owner-operated companies, generally those under about $3M in revenue. It measures the total financial benefit the business delivers to one full-time owner:
Net Profit + Owner’s Salary + Owner’s Benefits + Non-Recurring Expenses + Discretionary Expenses = SDE
Take a plumbing company in Hixson showing $95,000 of net profit on its return. The owner takes a $135,000 salary, carries a spouse on payroll at $45,000 for bookkeeping, runs about $14,000 a year of personal truck and fuel expense through the business, and replaced a service van outright last year for $52,000. SDE lands near $340,000. That is the figure a buyer underwrites, because that is what the business actually produces for whoever owns it.
EBITDA
Above roughly $3M in revenue, or wherever a real management layer exists, EBITDA becomes the measure. It strips out financing decisions, tax strategy and accounting choices to show operating cash flow, and it does not add back the owner’s salary, because the assumption is that someone has to be paid to do that job after closing.
Businesses valued on EBITDA usually carry higher multiples, and the reason is structural. An EBITDA business has already proved it can survive the owner leaving the building.
The Multiple, and What It Is Actually Measuring
Apply an industry multiple to SDE or EBITDA and you have a range. For small businesses generally, SDE multiples run about 1.5x to 3.5x and EBITDA multiples about 3x to 6x, with industry, size and risk profile deciding where inside the band a specific company lands.
Those bands are not a Chattanooga number or an Atlanta number. They are the same bands everywhere. What changes between markets is how many qualified buyers turn up to compete inside them, and that is a question about the buyer pool. The arithmetic is identical in both places. More on that below.
Add-Backs, and the Ones That Will Not Survive
Add-backs are expenses that are legitimate deductions on your return but would not continue for a new owner. They get added back to show the real economic benefit of the business. Your salary and benefits, personal vehicles, one-time repairs, family members on payroll who are not doing essential work, above-market rent paid to an entity you own, and genuinely personal spending run through the company all qualify.
Two cautions, and I see both regularly. The first is that a buyer’s accountant will scrutinize every one of them and a lender’s credit committee will scrutinize them again. An add-back you cannot document with an invoice and a sentence of explanation costs you more credibility than it gains you in price. The second is that anything recurring is not an add-back at all. If you have replaced a vehicle every year for four years, that is fleet capital expenditure and it belongs in the expense line where a buyer will put it back.
The Buyer Pool Here Is Smaller, and That Changes What Marketing Has to Do
The Chattanooga metro is six counties, three in Tennessee and three in Georgia, with about 588,000 people as of the Census Bureau’s 2024 estimate. Metropolitan Atlanta is about 6.4 million. Total nonfarm employment across the Chattanooga metro was roughly 297,000 in November 2025.
That gap has a direct consequence for how a business gets sold. A price is set by competition among buyers, so a smaller resident buyer pool means fewer of them arrive on their own. It does not mean your business is worth less. It means the work of finding the buyers has to be done deliberately. Listing and waiting will not do it here.
In practice I do not market a Chattanooga business to Chattanooga. Atlanta is under two hours down I-75, Nashville and Knoxville are within a comfortable drive, and a buyer relocating for the right company does not care much about the difference. The firm is licensed to transact in Georgia, Tennessee and South Carolina, and a confidential process that reaches all three is doing more for the eventual price than any amount of local advertising would.
The corollary matters too. If a business here is quietly listed on a national marketplace and left to sit, the shortage of local buyers becomes a real discount, because a business that has been visibly on the market for eleven months is negotiating from a weak position regardless of what it is worth.
What Tennessee Takes, and What Georgia Takes
This is where the two states genuinely diverge, and it is the part owners most often have backwards.
Tennessee has no state personal income tax. The Hall tax on interest and dividend income was repealed for tax years beginning January 1, 2021, so there is no state-level tax on a capital gain realized by an individual. Georgia, by contrast, taxes capital gain as ordinary income at its flat individual rate, which is 4.99% for 2026 after HB 463 was signed in May of this year.
Where owners get it wrong is in assuming that no personal income tax means no state tax on the sale. Tennessee taxes at the entity level instead:
• Excise tax at 6.5% of Tennessee net earnings. Net earnings starts from federal taxable income with state adjustments, so gain recognized by the entity on an asset sale sits squarely in the base.
• Franchise tax at 0.25% of Tennessee net worth, with a $100 minimum. The alternative property measure that used to sit on Schedule G was repealed by Public Chapter 950 in 2024, for tax years ending on or after January 1, 2024, so net worth is now the only base.
Both taxes reach corporations, LLCs, limited partnerships and business trusts. General partnerships and sole proprietorships are outside them, because the line the statute draws is limited liability protection, and size has nothing to do with it.
The practical shape of this: on a typical asset sale by a Tennessee LLC, the state takes 6.5% of the gain at the entity, and then nothing further when the proceeds reach the members. On the same transaction by a Georgia LLC, the entity-level exposure is different and the member pays 4.99% personally. Which structure produces the better outcome depends on the allocation, the basis and the entity, and it is a question for your CPA. I can tell you what the market will pay. They will tell you what you keep. What I will say is that the answer is rarely obvious from the headline price, and that the two states are close enough that the deal structure decides the winner more often than the state does.
Two more Tennessee items that come up in diligence and are worth knowing before they surprise you. Sales tax on the transfer of equipment and fixtures generally falls within the casual and isolated sale exemption, on the reasoning that a business selling its own operating assets is not in the business of selling that property, though the burden of proving it sits with the taxpayer. And the business tax filing threshold rose from $10,000 to $100,000 of gross receipts per jurisdiction under the Tennessee Works Tax Act in 2023, which changed who has to file. It does not change what a sale costs.
The State Line Runs Through the Middle of This Market
Three of the six counties in this metro are in Georgia. Catoosa, Dade and Walker sit immediately south of Chattanooga, and a company headquartered in Ringgold or Fort Oglethorpe is a Georgia business with a Chattanooga customer base, a Chattanooga labor pool and, frequently, a Tennessee owner.
That is a real complication in valuation and a bigger one in diligence:
• Registration and payroll run in both states. A crew that crosses the line daily creates obligations on both sides, and a buyer’s accountant will find the gaps.
• Where the real estate sits decides the closing cost. Tennessee’s realty transfer tax is $0.37 per $100 of consideration or value. Georgia’s is $1.00 for the first $1,000 and $0.10 for each additional $100, so roughly a tenth of the Tennessee rate. Georgia then adds an intangible recording tax of $1.50 per $500 of the note’s face amount, capped at $25,000. On a building changing hands with the business, those are different enough that the closing statement should be modeled before anyone signs.
• Sales tax rates differ, and customers notice. Tennessee’s state rate is 7% and Hamilton County adds 2.25%, for 9.25% combined. A retail or restaurant concept comparing sites on either side of the line is comparing different economics.
None of this makes a Georgia-side business harder to sell. It makes it a two-state file, and a file assembled as though it were one state loses time in diligence, which is where deals die.
Where the Business Sits
Location does most of its work through the lease and through the labor it can reach. A few submarkets and what they are:
• Enterprise South and the I-75 corridor north. The Volkswagen plant and its supplier activity anchor this. Volkswagen employs roughly 5,200 people here, and its workforce voted to join the UAW in April 2024 and ratified a first contract in February 2026. If your company sells into that supply chain, a buyer will want to understand what a unionized wage structure at the anchor does to your customers’ costs.
• The airport, Amnicola and the riverfront industrial belt. Smaller buildings, generally 10,000 to 40,000 square feet, and where most owner-operated manufacturing and distribution in the county actually lives.
• Catoosa, Ringgold and Walker on the Georgia side. Lower rents and available land, which is why cost-sensitive occupiers land there.
• Cleveland and Bradley County up I-75. Its own MSA technically, though the labor draw overlaps, and worth watching if your customer base or your labor draw extends that far.
• Hixson, North River, Ooltewah, Collegedale and East Hamilton. Residential growth has run ahead of commercial here, which is the pattern that supports home services, healthcare and neighborhood retail.
• Downtown, Northshore, Southside and the Gunbarrel Road corridor. Retail and hospitality, and the most lease-sensitive businesses in the market.
The industrial market has been genuinely tight. Metro vacancy was about 2.7% with average asking rent near $7.76 per square foot in the third quarter of 2025. For a seller with a good lease that has term left on it, that scarcity is worth real money, because a buyer who would otherwise have to go find space is inheriting yours. For a seller with eighteen months remaining and a landlord who has not returned a call, it is the single largest risk in the file.
The Industries That Trade in This Market
The employer list here is unusually concentrated for a metro this size, and it shapes both who sells and who buys. Erlanger sits near 6,000 employees, Hamilton County Schools near 5,800, Volkswagen around 5,200, BlueCross BlueShield of Tennessee about 4,100, the Tennessee Valley Authority about 3,900, CommonSpirit’s Memorial Hospital about 3,700, McKee Foods in Collegedale about 3,200 and Unum about 3,100.
Three things follow from that mix. Healthcare and insurance employment on this scale produces a steady stream of executives with real balance sheets looking to buy an operating company, which is a meaningful part of the individual buyer pool here. Manufacturing and logistics, with I-24, I-59 and I-75 converging in the city and Knight-Swift keeping the former US Xpress headquarters here after the 2023 acquisition, produce a supplier and service economy of exactly the size that trades in this range. And tourism is larger than outsiders expect, at more than 11 million visitors and about $1.8 billion of visitor spending in 2024, which supports a hospitality sector where seasonality is the first thing a lender tests.
One more item that comes up in diligence more often here than anywhere else I work. EPB, the municipal utility, has offered citywide gigabit fiber since 2010, ten gigabit since 2015 and twenty-five gigabit since 2022. For a business whose operations depend on connectivity, that is a durable operating advantage a buyer can verify, and it is worth naming explicitly in the memorandum. A buyer will not assume it.
What to Fix in the Twelve Months Before You List
If you are not in a hurry, the year before going to market is the highest-return work available to you:
• Reconcile the books and separate personal spending. Messy financials are the most common reason a deal falls apart here, and the fix takes a bookkeeper and a few months.
• Extend the lease. In a market at 2.7% industrial vacancy, a short lease is worse than it would be in a loose market, because the buyer’s alternative is expensive.
• Reduce what depends on you. Promote someone. Take two consecutive weeks off and see what breaks.
• Put customer relationships in writing. Contracted recurring revenue is worth materially more than the same revenue on a handshake.
• Clean up the two-state exposure if you have it. Registration, payroll and sales tax in both Tennessee and Georgia, resolved before diligence opens.
• Talk to your CPA about entity structure and allocation now. Both decisions have to be made under time pressure later, and the tax outcome of this transaction turns on them more than on the price.
Ready to Find Out What Your Business Is Worth?
I work with owners across the Chattanooga metro on both sides of the state line, some ready to list this year and some two or three years out and wanting to start preparing. The first step is the same either way: an honest read on what the business would bring today, and what it would bring after the twelve months of work above.
I offer a free, confidential broker’s opinion of value based on your actual financials, comparable transaction data and current market conditions. No obligation, and nothing leaves the conversation.
Schedule a confidential consultation → https://calendly.com/nolan-nolanscottteam
Or call me directly at 404-247-5880. Every conversation is completely confidential.