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.

Next Steps

Once you have a valuation range, talk to a business broker or M&A advisor if you are considering a sale. For planning purposes, use this number alongside your break-even analysis and cash flow forecast to make informed decisions about your business's future.