Financial Tools

Business Valuation Calculator

Small businesses sell on sellers discretionary earnings, not on net profit: the owner's salary, perks, interest and depreciation are added back because the buyer does not inherit them.

Last twelve months

Revenue

Net Profit (as filed)

Owner add backs

Owner Compensation

Personal Expenses In The Business (vehicle, travel, phone)

Depreciation And Amortisation

Interest

One Time Costs (will not repeat for a buyer)

The market and the balance sheet

Low Multiple (from comparable sales)

High Multiple

Revenue Multiple Check (sanity check only)

Cash In The Business

Debt To Be Assumed

Values shown are examples. Edit them to match your situation.

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Valuation Range

Owner Add Backs	$0
Sellers Discretionary Earnings	$0
SDE Margin	$0
Enterprise Value Range	$0
Midpoint	$0
Revenue Multiple Check	$0
Implied On Revenue	$0
To The Owner After Debt	$0

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For illustration only, not financial advice. Results are estimates based on the numbers you enter and do not constitute an offer, rate quote or approval.

Value follows earnings. Earnings follow price.

Solve for the list price that leaves the margin the valuation assumes.

Price a product

How this is worked out

Sellers discretionary earnings is net profit plus the owner's own compensation, personal expenses run through the business, interest, depreciation and genuine one time costs. A buyer takes over the earnings without those, which is why they are added back.

Enterprise value is SDE times a multiple. The multiple is a market observation, not arithmetic, and it comes from what comparable businesses actually sold for in your industry, at your size, with your customer concentration. This page never invents one, it uses the range you enter.

Equity value is enterprise value plus cash in the business minus debt assumed. That is the figure that reaches the seller, and it is the one people mean when they say what a business is worth.

The revenue multiple is a sanity check, not a valuation. If SDE and revenue point at very different numbers, one of the inputs is wrong.

Sellers discretionary earnings, the standard basis for main street business sales

Questions people ask

What multiple is realistic?

Most main street businesses under a million dollars of SDE trade between two and four times, with service businesses at the lower end and businesses with recurring revenue and a management team in place at the higher end. Ask a broker for comparable sales in your category rather than taking a number from the internet.

What can I add back?

Your own salary and benefits, one owner vehicle, genuinely personal expenses run through the business, interest, depreciation and amortisation, and one time costs that will not repeat. Every one has to survive a buyer's question, so keep the evidence.

What lowers the multiple most?

Customer concentration, an owner who is the business, poor books, and a declining trend. A business where one customer is 40% of revenue trades well below one where the top customer is 5%.

Is inventory included?

Usually not in the multiple. Saleable inventory is normally added at cost on top of the business price, and it is worth agreeing that in writing early because it moves the number a lot.

Should I use EBITDA instead?

Above roughly one to two million dollars of earnings, yes, because the buyer is likely to be a company rather than an owner operator and will not add back a market rate manager salary. Below that, SDE is the language brokers and buyers use.

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