How do you value a small business?

The most common method for small businesses is a multiple of Seller's Discretionary Earnings (SDE). Calculate SDE by taking net profit and adding back owner salary, one-time expenses, and non-cash charges. Then multiply by an industry-specific factor, typically 1.5x to 4x.

What is a good SDE multiple?

SDE multiples vary by industry, growth rate, and risk. Service businesses often sell at 1.5-2.5x SDE. Established businesses with recurring revenue can command 3-4x or more. Location-dependent businesses tend toward the lower end.

What factors increase a business valuation?

Recurring revenue, diversified customer base, documented processes, strong profit margins, owner independence, and consistent growth all push multiples higher. A business that runs without the owner is worth more than one that depends on them.

Should I use revenue or earnings to value my business?

Earnings-based methods (SDE or EBITDA multiples) are more accurate for profitable businesses. Revenue multiples are sometimes used for high-growth companies or SaaS businesses that are not yet profitable, but they can be misleading for typical small businesses.

What is the difference between SDE and EBITDA for valuation?

SDE adds back the owner's salary and personal perks, making it the standard for small owner-operated businesses. EBITDA does not add back owner compensation because it assumes a manager will be hired. Businesses with revenue above $1-2 million or with professional management teams typically use EBITDA.

How do I increase my business value before selling?

Focus on reducing owner dependence, building recurring revenue, documenting processes, cleaning up financials, diversifying your customer base, and locking in key employees. Start 2 to 3 years before you plan to sell. Buyers pay premiums for businesses that can run without the current owner.

How long does it take to sell a small business?

The average small business sale takes 6 to 12 months from listing to closing. Businesses priced accurately with clean financials sell faster. Overpriced listings or those with undocumented processes can sit on the market for 18 months or longer.

Do I need a business broker to sell my company?

A broker is not required, but most sellers benefit from one. Brokers handle valuation, marketing, buyer screening, and negotiation. They typically charge 8-12% of the sale price for businesses under $1 million. For larger deals, the commission percentage drops. The right broker often gets a higher sale price that more than covers their fee.

How do you value a small business?

The most common method for small businesses is a multiple of Seller's Discretionary Earnings (SDE). Calculate SDE by taking net profit and adding back owner salary, one-time expenses, and non-cash charges. Then multiply by an industry-specific factor, typically 1.5x to 4x.

What is a good SDE multiple?

SDE multiples vary by industry, growth rate, and risk. Service businesses often sell at 1.5-2.5x SDE. Established businesses with recurring revenue can command 3-4x or more. Location-dependent businesses tend toward the lower end.

What factors increase a business valuation?

Recurring revenue, diversified customer base, documented processes, strong profit margins, owner independence, and consistent growth all push multiples higher. A business that runs without the owner is worth more than one that depends on them.

Should I use revenue or earnings to value my business?

Earnings-based methods (SDE or EBITDA multiples) are more accurate for profitable businesses. Revenue multiples are sometimes used for high-growth companies or SaaS businesses that are not yet profitable, but they can be misleading for typical small businesses.

What is the difference between SDE and EBITDA for valuation?

SDE adds back the owner's salary and personal perks, making it the standard for small owner-operated businesses. EBITDA does not add back owner compensation because it assumes a manager will be hired. Businesses with revenue above $1-2 million or with professional management teams typically use EBITDA.

How do I increase my business value before selling?

Focus on reducing owner dependence, building recurring revenue, documenting processes, cleaning up financials, diversifying your customer base, and locking in key employees. Start 2 to 3 years before you plan to sell. Buyers pay premiums for businesses that can run without the current owner.

How long does it take to sell a small business?

The average small business sale takes 6 to 12 months from listing to closing. Businesses priced accurately with clean financials sell faster. Overpriced listings or those with undocumented processes can sit on the market for 18 months or longer.

Do I need a business broker to sell my company?

A broker is not required, but most sellers benefit from one. Brokers handle valuation, marketing, buyer screening, and negotiation. They typically charge 8-12% of the sale price for businesses under $1 million. For larger deals, the commission percentage drops. The right broker often gets a higher sale price that more than covers their fee.

Back to Calculators

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Business Valuation Calculator

How is a small business valued? Most small businesses are valued using a multiple of Seller's Discretionary Earnings (SDE), which represents the total financial benefit a single owner-operator takes from the business. SDE = Net Income + Owner's Salary + Owner's Benefits + Depreciation + Interest + One-Time Expenses. The typical SDE multiple for small businesses ranges from 2x to 4x, meaning a business with $150,000 in SDE is generally worth $300,000 to $600,000.

This calculator uses four valuation methods for a more complete picture: SDE multiples, revenue multiples, asset-based valuation, and discounted cash flow (DCF) analysis. Each method has strengths depending on your industry and business type.

What this means for your business

SDE multiples vary by industry: SaaS companies sell for 4-8x SDE, professional services for 2-4x, restaurants for 1.5-3x, and retail for 1-2.5x. Businesses with clean financial records, diversified customer bases, and documented processes command higher multiples. If you are planning to sell, start preparing at least 2-3 years in advance by cleaning up your books and reducing owner dependency.

Business Valuation Calculator

Estimate what your business is worth using SDE multiples, revenue multiples, asset-based, and DCF methods.

Industry (for valuation multiples)

Default multiples will be used if no industry is selected.

Annual Revenue

Net Income (before owner salary)

SDE Add-Backs

Owner's Salary

Owner's Benefits (health, car, phone, etc.)

One-Time / Non-Recurring Expenses

Interest Expense

Other Owner Perks / Add-backs

For Asset-Based Valuation

Total Business Assets

Total Liabilities

For DCF Valuation

Growth Rate (%)

Discount Rate (%)

What Is Your Business Worth?

Business valuation is the process of determining how much a business would sell for. Whether you are planning to sell, bring on a partner, apply for a loan, or just want to know where you stand, understanding your business value is critical.

There is no single "correct" value. Different methods produce different numbers, and the real value is what a buyer is willing to pay. This calculator gives you a range using the most common valuation approaches.

Valuation Methods Explained

SDE Multiple (Seller's Discretionary Earnings)

This is the most common method for small businesses with under $1M in earnings. SDE starts with net income, then adds back the owner's salary, benefits, one-time expenses, and non-cash charges like depreciation.

Business Value = SDE x Industry Multiple

The multiple depends on your industry, growth rate, and risk factors. Typical ranges:

Restaurants: 1.5-3x SDE
Retail: 1-2.5x SDE
Professional Services: 2-4x SDE
Construction / Trades: 1.5-3x SDE
E-commerce: 2.5-4x SDE
SaaS / Technology: 4-8x ARR (annual recurring revenue)
Manufacturing: 2-4x SDE
Healthcare: 3-6x SDE

Revenue Multiple

A simpler approach: multiply annual revenue by an industry-specific factor. This works best for businesses with predictable revenue streams.

Business Value = Annual Revenue x Revenue Multiple

Revenue multiples are usually lower than SDE multiples because they do not account for profitability. A business doing $1M in revenue at a 2% margin is worth much less than one doing $1M at a 20% margin.

Asset-Based Valuation

This method adds up the fair market value of all business assets (equipment, inventory, real estate, accounts receivable) and subtracts liabilities.

Business Value = Total Assets - Total Liabilities

Asset-based valuation sets a floor. Your business should be worth at least this much, since a buyer could liquidate the assets.

Simple DCF (Discounted Cash Flow)

DCF projects future cash flows and discounts them back to today's dollars. It answers: what is the present value of all the money this business will generate?

This method is more complex but captures growth potential. The calculator uses a simplified version with a 5-year projection and a terminal value.

What Drives Valuation Up (or Down)?

Higher valuation:

Consistent revenue growth
Strong profit margins
Recurring or subscription revenue
Diverse customer base (no single customer is more than 15-20% of revenue)
Owner can step away without operations falling apart
Clean financial records

Lower valuation:

Declining revenue
Owner-dependent operations
Concentration risk (few large customers)
Messy or incomplete financials
Industry headwinds
Pending legal issues

Is Your Business Ready to Sell?

Before listing, run through this checklist:

[ ] Three years of clean, up-to-date financial statements
[ ] Documented processes and procedures
[ ] Key employees retained with agreements
[ ] Customer concentration below 15-20% per customer
[ ] Owner works less than 50 hours per week in operations
[ ] No pending lawsuits or tax issues
[ ] Lease terms that transfer to a buyer
[ ] All licenses and permits current

The more boxes you check, the closer you are to a smooth sale.

How to Use This Calculator

Enter your annual revenue from your most recent full year.
Enter your net income (bottom line from your P&L or tax return).
Enter your owner's salary and add-backs to calculate SDE. The calculator provides common add-back categories.
Enter your total assets and liabilities for the asset-based valuation.
Select your industry to apply the appropriate SDE and revenue multiples.
Review the valuation range. The calculator shows estimates from each method so you can see the spread.

What This Means for Your Business

Even if you are not planning to sell, knowing your business value has practical applications. It informs partnership buyout negotiations, helps you secure better loan terms (lenders want to know what they are lending against), and gives you a retirement planning number.

If your valuation feels low, the levers are clear: increase SDE (grow revenue, cut waste), improve the factors that drive higher multiples (reduce owner dependency, diversify revenue, document processes), and clean up your financials. A business that earns the same profit but has stronger systems, cleaner books, and less owner dependency will command a higher multiple every time.

Your valuation connects to your SDE calculation, your profit margins, and your break-even point. Run all three to understand the full financial picture before making any decisions about selling, partnering, or expanding.

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