FINANCIAL · BUSINESS VALUATION
Business Valuation Calculator
Estimate your business value using the SDE or EBITDA multiple method — enter annual earnings and a valuation multiple to see enterprise value, equity value, and a ±0.5× sensitivity range. Educational estimate; consult a CVA for a formal appraisal.
About This Calculator
Estimate your business value using the two most common market-based approaches: the SDE (Seller's Discretionary Earnings) multiple for owner-operated businesses under ~$5M in revenue, and the EBITDA multiple for mid-market businesses. Enter your annual earnings figure and a market multiple to see the enterprise value, equity value after adjusting for liabilities and cash, and a sensitivity range at ±0.5× the chosen multiple.
How It Works
Both methods multiply a measure of annual earnings by a market-derived multiple that reflects what buyers are currently paying for businesses in your industry and size range. The SDE method uses the seller's discretionary earnings (net profit plus owner's salary, benefits, and add-backs), which is standard for small owner-operated businesses. The EBITDA method (earnings before interest, taxes, depreciation, and amortization) is standard for larger businesses. Enterprise value = Earnings × Multiple. Equity value = Enterprise value − Liabilities + Cash. The sensitivity range shows the value at ±0.5× the selected multiple to give a realistic low-to-high range.
The Formula
Enterprise Value = Annual Earnings × Multiple Equity Value = Enterprise Value − Liabilities + Cash
- Annual Earnings
- Annual SDE (Seller's Discretionary Earnings) or EBITDA
- Multiple
- Valuation multiple (SDE: typically 1.5–4.0×; EBITDA: typically 3.0–8.0×)
- Liabilities
- Total business liabilities (loans, payables)
- Cash
- Cash and cash equivalents on the balance sheet
Frequently Asked Questions
- What is the difference between SDE and EBITDA?
- SDE (Seller's Discretionary Earnings) = Net profit + Owner's salary and benefits + One-time expenses + Depreciation/amortization. It represents the total economic benefit available to an owner-operator, and is the standard metric for businesses under ~$5M in revenue. EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization — it measures operational cash flow and is used for larger or multi-owner businesses where a new owner would hire a manager rather than run the business themselves.
- What is a typical valuation multiple?
- Multiples vary by industry, size, growth rate, and market conditions. For small owner-operated businesses (< $1M SDE), 2.0–3.0× SDE is common. Businesses with $1M–$5M SDE often trade at 3.0–4.5×. Mid-market companies trade at 4×–8× EBITDA (or higher for fast-growth tech/SaaS). Check recent transaction data from BizBuySell, IBBA Market Pulse, or a business broker for your specific industry.
- What is enterprise value vs. equity value?
- Enterprise value is the total value of the business to all capital providers (debt and equity). Equity value (also called "net proceeds to seller" in small-business transactions) is what the owner actually receives after paying off liabilities. Equity value = Enterprise value − Debts + Cash. In small-business acquisitions, the buyer typically acquires a debt-free, cash-free business, so the enterprise value equals the purchase price and sellers pay off debts at closing.
- Why do I need a professional appraisal?
- Market multiples are averages — your specific business's value depends on dozens of factors including customer concentration, owner dependence, recurring revenue, industry trends, competitive position, and more. A Certified Valuation Analyst (CVA) or business broker will analyze your financials, benchmark to actual transactions, and produce a defensible value used in sale negotiations, estate planning, or partner buyouts.
- When is the EBITDA method used?
- EBITDA is used when the business has professional management (not owner-run), revenue above ~$2M, and when comparing across companies with different capital structures (debt levels). It is the standard in lower-middle-market M&A ($2M–$50M in revenue) and institutional lending.