Business Valuation Calculator — SDE, Revenue & Asset Methods
Estimate your business value using three common methods.
Business Financials
Estimated Business Value Range
Seller's Discretionary Earnings (SDE)
Valuation Methods
How Business Valuation Works
Whether you're planning to sell, seeking investment, or just curious, knowing what your business is worth is essential. There's no single "right" answer — professionals typically use multiple methods and triangulate.
Method 1: SDE Multiple (Most Common for Small Businesses)
Seller's Discretionary Earnings (SDE) represents the total financial benefit a single owner-operator gets from the business. It adds back the owner's salary, depreciation, interest, and one-time expenses to net profit.
A buyer then applies a multiple (typically 1.5x to 4x for small businesses) based on industry, growth trajectory, customer concentration, and other risk factors.
Method 2: Revenue Multiple
Sometimes used for high-growth or pre-profit businesses. Revenue multiples range from 0.5x to 3x for most small businesses. SaaS companies can command 5-10x revenue. This method is less reliable for established businesses since it ignores profitability.
Method 3: Asset-Based
Total assets minus total liabilities. Best for asset-heavy businesses (manufacturing, real estate, equipment rental) or businesses being liquidated. Undervalues service businesses where the real asset is customer relationships and recurring revenue.
What Increases Your Multiple?
Recurring revenue — Subscriptions and contracts are worth more than one-time sales
Customer diversification — No single customer should be more than 15-20% of revenue
Growth trajectory — Growing 20%+ year-over-year commands premium multiples
Owner independence — Businesses that run without the owner are worth more
Clean financials — Audited or reviewed statements reduce buyer risk
Documented processes — SOPs and training manuals ease transition
When to Get a Professional Valuation
This calculator gives you a ballpark estimate. For actual transactions, hire a Certified Business Appraiser (CBA) or Accredited Senior Appraiser (ASA). Professional valuations cost $3,000-$10,000 but are essential for:
- Selling the business
- Partnership buyouts
- Divorce proceedings
- Estate planning
- SBA loan applications
- Insurance claims
What Small Businesses Actually Sell For
BizBuySell's Insight Report, which tracks thousands of small business transactions quarterly, shows that the median small business sold in 2024 traded at approximately 2.4x seller's discretionary earnings (SDE) and 0.6x annual revenue. These multiples vary sharply by industry: service businesses sell at 2–4x SDE, restaurants at 1.5–2.5x SDE (0.3–0.8x revenue), e-commerce at 3–4x SDE, and SaaS/software at 4–8x SDE (3–8x annual recurring revenue). The IBBA Market Pulse Q4 2024 report confirms these ranges and notes that businesses with recurring revenue, documented processes, and a trained management team command 20%–40% premiums over comparable businesses lacking those attributes.
Size matters significantly. Pepperdine Private Capital Markets Report data shows businesses under $1M in EBITDA trade at 2–4x multiples, while lower middle market businesses with $2M–$5M EBITDA trade at 5–7x, and those above $5M EBITDA reach 7–10x+. This is the "size premium" — larger cash flows attract institutional buyers, competitive auctions, and access to cheaper capital. A business that grows from $500K to $2M in EBITDA does not just triple in earnings; it often quintuples or more in enterprise value because the multiple itself expands. This is why scaling past the $1M EBITDA threshold is a common strategic milestone for owners planning an eventual exit.
The valuation range the calculator above produces is a starting point, not a quoted price. Final sale prices depend on deal structure (all-cash vs. seller-financed vs. earn-out), buyer pool (strategic vs. financial vs. individual), clean financials (recast P&Ls adding back owner perks, one-time expenses, and non-business costs), customer concentration (a single customer over 20% of revenue is typically a 10%–30% discount), and due-diligence findings. Get professional appraisals ($3,000–$10,000 typical cost) before any serious sale or major transaction — the calculator's range is for self-planning, not for a buyer negotiation.
When to Use This Calculator
Exit Planning
Understanding your current valuation tells you how far you are from your exit target. Run this annually to track value creation and identify which levers move the multiple most.
Bringing in Partners or Investors
Before negotiating equity splits, you need a baseline valuation. Even a rough estimate prevents giving away too much or too little in early-stage discussions.
Insurance and Estate Planning
Key-person insurance, buy-sell agreements, and estate planning all require a business valuation. Use this to get an initial number before engaging a certified appraiser.
Common Mistakes in Business Valuation
Confusing SDE with EBITDA
SDE adds back owner salary and benefits — used for owner-operated businesses under $5M revenue. EBITDA is used for larger businesses with professional management. Using the wrong metric with the wrong multiple leads to significantly over- or under-valuing the business.
Using one method in isolation
Professional appraisers use a weighted combination of methods. Relying on only the revenue multiple ignores profitability; only asset value ignores earnings power. The SDE method alone misses growth potential. Real valuations triangulate across approaches.
Not adding back personal expenses run through the business
Car payments, personal travel, meals, phone plans, and family salaries run through the business all reduce reported profit — and reduce your apparent valuation. Properly recasting financials to normalize these expenses is essential before selling.
Valuing based on one exceptional year
Buyers use a weighted average of 2–3 years of earnings, not just your best year. A business that made $500K once but averages $300K will be valued closer to the $300K figure. Sustainable earnings matter more than peak earnings.