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Business Valuation Calculator

Estimates the fair market value of a small to medium-sized business using common valuation methods like revenue multiples, SDE/EBITDA multiples, or asset-based valuation. Useful for owners, buyers, and advisors.

Your details

Choose the primary method for valuation. 'Revenue Multiple' uses annual revenue. 'SDE Multiple' uses Seller's Discretionary Earnings (common for small businesses). 'EBITDA Multiple' uses Earnings Before Interest, Taxes, Depreciation, and Amortization. 'Asset-Based' values net assets.

The business's total annual revenue (sales) in USD. Required if Valuation Method is 'Revenue Multiple'.

Pre-tax profit + owner's salary + non-cash expenses + non-operating expenses. Common for small businesses. Required if Valuation Method is 'SDE Multiple'.

Earnings Before Interest, Taxes, Depreciation, and Amortization. Common for larger small businesses and mid-market companies. Required if Valuation Method is 'EBITDA Multiple'.

Total fair market value of all business assets (equipment, inventory, property, etc.). Required if Valuation Method is 'Asset-Based'.

Total debts and obligations of the business. Required if Valuation Method is 'Asset-Based'.

Select your primary industry for suggested valuation multiples. These are general benchmarks; actual market conditions vary.

Check this box to enter your own multiple instead of using the industry-suggested range.

Enter your chosen multiple (e.g., 2.5, 4.0). The valuation will be: (Revenue, SDE, or EBITDA) x this multiple.

Result

Estimated Business Value US$1,120,000.00

The estimated fair market value of the business.

How it is calculated

Valuation Multiple Applied The multiple used for the income-based valuation.
3.2
Income-Based Valuation Value based on revenue or profit multiplied by the industry multiple.
US$1,120,000.00
Asset-Based Valuation Net asset value: Total Assets minus Total Liabilities.
US$0.00
Keep in mind
  • This calculator provides an estimate based on common valuation methodologies. Actual business value can vary significantly based on market conditions, growth potential, customer concentration, and specific terms of a sale.
  • The industry multiples are based on 2025 aggregated private transaction data and are for informational purposes only. They may not reflect current market conditions.
  • For a definitive valuation, consult with a qualified business appraiser, accountant, or M&A advisor.
  • Required fields are enforced logically: If you select 'Revenue Multiple', 'Annual Revenue' must be provided; if you select 'SDE Multiple', 'SDE' must be provided; if you select 'EBITDA Multiple', 'EBITDA' must be provided; if you select 'Asset-Based', both 'Total Assets' and 'Total Liabilities' must be provided. The calculator uses `coalesce(input, 0)` to handle missing data, but for an accurate estimate, please enter the required figures.

Indicative result, calculated from the details and the rules listed below. It does not replace an official calculation or advice from a professional.

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Business Sale Agreement
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Business Valuation Calculator

Determining the fair market value of a business is a critical step for owners planning an exit, buyers evaluating an acquisition, or partners establishing a buy-sell agreement. This calculator uses widely accepted valuation methods to provide a preliminary estimate based on your financial inputs and industry.

How Business Valuation Works

Valuation is not an exact science, but several standard approaches are used by professionals and the market:

  • Income-Based Approaches: Value the business based on its ability to generate profit. Common methods include applying a multiple to annual revenue, Seller's Discretionary Earnings (SDE), or EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). The multiple reflects risk, growth potential, and industry norms.
  • Asset-Based Approach: Calculates the net asset value by subtracting total liabilities from the fair market value of all business assets. This method is often used for asset-heavy businesses or those being liquidated.
  • Market Approach: Compares the business to recent sales of similar companies. This calculator incorporates this indirectly through industry-specific multiples.

Using the Calculator: A Step-by-Step Example

Imagine a small software company (SaaS) with $1.2 million in annual revenue and an SDE of $350,000. The owner selects the "SDE Multiple" valuation method and chooses the "Technology / SaaS" industry sector. The calculator suggests an SDE multiple of 3.2x for that sector. The estimated business value would be calculated as: $350,000 (SDE) x 3.2 (Multiple) = $1,120,000.

For a manufacturing company with an EBITDA of $520,000, selecting the "EBITDA Multiple" method and the "Manufacturing" sector suggests a multiple of 5x. The valuation would be: $520,000 x 5 = $2,600,000.

These figures represent a starting point for negotiations. A buyer might argue for a lower multiple due to market conditions, while the seller might justify a higher one based on rapid growth or unique assets.

Common Valuation Scenarios

  • Selling a Main Street Business: For restaurants, retail shops, or service businesses, SDE-based valuation is most common. Multiples often range from 1.5x to 3x SDE.
  • Acquiring a Professional Practice: Law firms, accounting practices, and consultancies are often valued on a revenue multiple (e.g., 0.8x - 1.5x) or an SDE multiple, with strong consideration for client retention.
  • Buy-Sell Agreement Funding: Partners often use a fixed formula (like the one this calculator can model) or agree to periodic appraisals to set the price for a triggering event like a partner's departure.

Next Steps: Documenting the Value

Once you have an estimated value, formalizing the terms of a sale or transfer requires a legally binding agreement. A Business Sale Agreement (or Purchase Agreement) details the final purchase price, payment terms, assets included, and representations by both parties. For business partners, a Buy-Sell Agreement pre-defines the valuation method and terms for buying out an owner's interest upon events like death, disability, or retirement.

Remember, this tool offers an educational estimate. For legal, tax, and financial advice tailored to your specific transaction, consult with qualified professionals.

Frequently asked questions

What is Seller's Discretionary Earnings (SDE)?

SDE is the total financial benefit a single owner-operator derives from the business annually. It typically includes pre-tax profit, the owner's full salary and benefits, non-cash expenses (like depreciation), and non-operating or one-time expenses. It's a key metric for valuing small businesses.

What's the difference between SDE and EBITDA?

SDE is used primarily for small, owner-operated businesses where the owner's compensation is a major expense. EBITDA is used for larger small businesses and mid-market companies where there is a management team in place. EBITDA excludes owner compensation, taxes, interest, depreciation, and amortization.

How accurate is this calculator?

This calculator provides a market-informed estimate based on aggregated data. It is a useful starting point for understanding valuation ranges. However, the actual selling price of a business is determined by negotiation and can be influenced by many factors not captured here, such as growth trends, competitive landscape, lease terms, and the motivation of buyer and seller.

Why do valuation multiples vary by industry?

Multiples reflect perceived risk, growth potential, profitability norms, and asset intensity. A high-growth SaaS company typically commands a higher multiple than a stable, asset-heavy retail store because investors are paying for future earnings potential versus current assets.

When should I use an asset-based valuation?

An asset-based approach is often suitable for businesses being liquidated, holding companies, or capital-intensive businesses (like some manufacturing) where the underlying assets (property, equipment) constitute a large portion of the value. It can also serve as a "floor" value in a sale.

What documents do I need after getting a valuation estimate?

If you are proceeding with a sale, you will need a comprehensive purchase agreement (e.g., Business Sale Agreement, Asset Purchase Agreement, or Stock Purchase Agreement). If you are setting up terms with co-owners, a Buy-Sell Agreement is essential. These documents formalize the price, payment structure, and conditions of the transaction.

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