It is important to remember that business valuation can't be separated from the terms of the offer, so it is not always the highest offer price that truly represents the best deal. Keeping that in mind, according to a 2015 report from the Pepperdine Private Capital Markets Project, private equity firms reported a range of valuations for small manufacturing firms between 4x and 8x EBITDA (earnings before interest, taxes, depreciation, and amortization) depending on the size of the company. For example, the survey suggests that a company that may be somewhat comparable to yours with $1 million in EBITDA typically sold for around $4 million.
However, in my experience the range of selling prices for small companies varies dramatically and the only real benchmark for a "fair" valuation is based on the range of offers that you actually receive when marketing your business for sale.
You should consider educating yourself on the common methods used for business valuation, so that you can make your own independent judgment for comparison to what your business broker is telling you.
In short, there are 3 valuation approaches that are frequently discussed.
1) Asset valuation which basically amounts to totaling up the assets of your business and reducing the amount by your liabilities. The difficult part of this approach is assessing the value of assets and liabilities that are not accurately valued on your balance sheet (such as the value of your brand, customer relationships that will produce long term future revenue, or the risk of a major regulatory change that would damage your business).
2) Market valuation which is essentially based on finding values for comparable companies and using those to estimate the value of your company (i.e. a competitor half your size recently sold for $10 million, which may lead you to estimate the value of your company at $20 million).
3) Income valuation which is based on projecting your future earnings and using the discounted cash flow method to find the value of those earnings in today's dollars.