Business Valuation Calculator
Estimate what a small business could sell for. A company with $160,000 of SDE at a 2.5x multiple is worth about $400,000.00.
Two common ways to value a small business
SDE multiple: Seller discretionary earnings equal net profit plus owner salary plus personal and one-time expenses. Small businesses usually sell for 1.5 to 3.5 times SDE.
Revenue multiple: Many service businesses trade at 0.5 to 1.5 times annual revenue, and software at several times revenue.
Default numbers: SDE = $90,000 + $60,000 + $10,000 = $160,000.00. At 2.5x the value is $400,000.00. The revenue method gives $480,000.00, so a reasonable range is $400,000.00 to $480,000.00.
What moves the multiple
- Recurring revenue and customer concentration
- Growth trend and profit margins
- How much depends on the owner
- Industry, location and asset base
This is an estimate, not an appraisal. Use it to set expectations before talking with a broker. Check margins with the gross profit calculator.
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Frequently asked questions
How do you value a small business?
Most use a multiple of seller discretionary earnings, cross-checked with revenue and asset values.
What is SDE?
Net profit plus the owner salary, benefits, interest, depreciation and one-time expenses.
What multiple do small businesses sell for?
Often 1.5 to 3.5 times SDE, depending on risk and industry.
Do I need a professional valuation?
For a sale, tax or legal matter, yes. A broker or certified appraiser can help.
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