Business Valuation Calculator

How Business Valuation Works

Most small businesses are valued using a multiple of Seller's Discretionary Earnings (SDE). SDE represents the total financial benefit to a working owner — net income plus the owner's salary, benefits, and any personal expenses run through the business.

What Is SDE?

SDE = Net Income + Owner's Salary + Add-Backs

• Net Income: Profit after all operating expenses
• Owner's Salary: W-2 wages, health insurance, retirement contributions
• Add-Backs: Personal vehicle, cell phone, travel, one-time expenses

Why Multiples Vary by Industry

Different industries command different multiples based on:

• Recurring revenue: Subscription businesses (SaaS) trade at higher multiples
• Owner dependency: If the business runs without the owner, it's worth more
• Growth potential: High-growth industries attract premium valuations
• Capital requirements: Asset-heavy businesses may trade lower
• Customer concentration: Diversified customer base = higher multiple

Important Caveats

This calculator provides a rough estimate based on industry averages. Actual valuations depend on many factors including:

• Quality and trend of earnings (growing vs. declining)
• Customer and supplier concentration
• Owner's involvement and management team
• Competitive moat and market position
• Real estate, equipment, and inventory included
• Deal structure (all-cash vs. seller financing)

Investing without proper due diligence is gambling. This tool is for education only — always work with qualified professionals before making acquisition decisions.