Key Takeaways
- Most small businesses (under $5M revenue) are valued using the SDE method: Seller’s Discretionary Earnings × a multiple of 1.5×–4×.
- Mid-market businesses use EBITDA multiples (3×–10×). High-growth companies and SaaS use revenue multiples (1×–12×).
- The multiple matters more than the formula. A business generating $300K SDE at 2× is worth $600K; at 3× it is worth $900K — a $300K swing from the same earnings.
- According to BizBuySell’s market data, the median sale price of US small businesses is roughly 2.3×–2.8× SDE depending on industry.
- A valuation calculator gives you an estimate — not an appraisal. For M&A transactions, financing, or legal purposes, engage a certified business valuator.
Table of Contents
- What is a Business Valuation Calculator?
- How Much Is My Business Worth?
- SDE Valuation Calculator — Small Business Method
- EBITDA Multiple Method — Mid-Market
- Business Value Calculator by Revenue
- Asset-Based Valuation
- Standard Valuation Multiples by Industry
- Tips & Common Valuation Mistakes
- Frequently Asked Questions
- Related Calculators
What is a Business Valuation Calculator?
A business valuation calculator estimates what your company is worth based on its financial performance, the type of business, and the valuation method appropriate for your size and industry. Unlike a formal appraisal (which requires a certified valuator and can cost $5,000–$25,000+), a free business valuation calculator gives you an educated estimate you can use to set realistic expectations before selling, approaching investors, or negotiating a partnership buyout.
Our calculator uses four industry-standard methods used by business brokers, M&A advisors, and private equity firms worldwide:
- SDE method — for small businesses under ~$5M revenue where an owner-operator is involved
- EBITDA multiple — for mid-market businesses with professional management teams
- Revenue multiple — for SaaS, high-growth, and pre-profit companies where future potential matters more than current earnings
- Asset-based method — for asset-heavy businesses (manufacturing, real estate) or distressed situations
The right method depends on your business model. Using the wrong one — the most common mistake business owners make — can produce a valuation that is off by 50% or more in either direction.
How Much Is My Business Worth?
The answer to how much is my business worth depends on three factors: earnings power, growth potential, and the risk profile of those earnings. A business generating $200K in annual SDE is not automatically “worth” $200K — buyers pay a multiple of those earnings based on how reliable, transferable, and scalable the business is.
The key variables that drive the multiple up or down are:
- Revenue trend: Growing revenue commands a higher multiple than flat or declining revenue, regardless of the current earnings level.
- Owner dependency: A business that cannot function without the owner is worth less than one with capable staff and documented systems. Highly owner-dependent businesses typically sell at 1.5×–2× SDE; well-systematized businesses reach 3×–4×.
- Customer concentration: If one client represents more than 20% of revenue, buyers discount the multiple significantly.
- Recurring revenue: Contracts, subscriptions, and retainers increase multiple because they reduce buyer risk.
- Industry and market conditions: Some industries (healthcare, software) command premium multiples; others (restaurants, retail) carry risk discounts.
SDE Valuation Calculator — Small Business Method
The SDE (Seller’s Discretionary Earnings) valuation is the standard method for small businesses — typically defined as businesses with less than $5M in annual revenue and an owner-operator who works in the business. It is used by the vast majority of small business brokers in the United States and is the methodology endorsed by the International Business Brokers Association (IBBA).
How to Calculate SDE
SDE = Net Profit + Owner Salary + Add-backs
Business Value = SDE × Multiple
Net profit is taken from your P&L statement, typically before owner compensation. Owner salary is added back because a new buyer may pay themselves differently. Add-backs include personal expenses run through the business (personal vehicle, personal phone, owner health insurance, one-time legal fees, non-recurring expenses) that would not exist for a new owner.
Example: A landscaping business with $80K net profit, $90K owner salary, and $15K in add-backs has an SDE of $185K. At a 2.5× multiple, the business is worth approximately $462,500.
What Multiple Should You Use?
According to BizBuySell’s annual market insight report, most small businesses trade between 1.5×–3.5× SDE. Here is a general guide:
- 1×–1.5×: Declining revenue, high owner dependency, no documented systems, difficult industry
- 2×–2.5×: Stable business, some staff, modest growth, average transferability
- 3×–3.5×: Growing revenue, capable staff, recurring customers, strong documentation
- 4×–5×+: Strong brand, high recurring revenue, scalable systems, niche market leadership
EBITDA Multiple Method — Mid-Market
For larger businesses — typically $1M–$50M in revenue with professional management teams and audited financials — buyers and M&A advisors use EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) rather than SDE. The key difference: EBITDA does not add back owner salary, because the assumption is that the business can run with a professional CEO hired at market rate.
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
Enterprise Value = EBITDA × Multiple
EBITDA multiples range from 3×–12× for most mid-market businesses. According to Damodaran’s industry EV/EBITDA data, technology and healthcare businesses consistently command the highest multiples, while restaurants and traditional retail trade at the low end.
Business Value Calculator by Revenue
Revenue multiples are used when earnings-based methods don’t apply — most commonly for SaaS businesses, high-growth startups, and pre-profit companies where the value lies in future potential rather than current profit. This is also the most relevant method for a startup valuation calculator.
Valuation = Annual Revenue (or ARR) × Revenue Multiple
Revenue multiples are highly sensitive to growth rate. According to KeyBanc Capital Markets’ SaaS survey data, SaaS businesses growing 50%+ year-over-year can command 8×–15× ARR, while those growing under 20% typically trade at 2×–4× ARR. The “Rule of 40” — where growth rate + profit margin should exceed 40% — is a common benchmark investors use to assess SaaS quality.
For non-SaaS businesses, revenue multiples are much lower. A traditional service business or brick-and-mortar retailer might trade at 0.3×–1× revenue. The revenue multiple method is generally unsuitable for businesses with thin or inconsistent margins.
Asset-Based Valuation
The asset-based valuation method calculates business value as the difference between total assets (at fair market value) and total liabilities. It is most appropriate for:
- Asset-heavy businesses where the tangible assets (real estate, equipment, fleet) are the primary value driver
- Holding companies whose primary purpose is to own assets
- Distressed or declining businesses where earnings multiples would produce a lower value than the underlying assets
- Liquidation scenarios where all assets are being sold
The method produces two figures: going concern value (assets at fair market value minus liabilities) and liquidation value (assets at forced-sale discounts — typically 50–85% of FMV depending on asset type). Real estate retains more value in liquidation (~85%); inventory and specialized equipment may only recover 50–60%.
Standard Valuation Multiples by Industry (2026)
The table below shows current SDE and EBITDA multiples by industry based on transaction data from BizBuySell, IBBA, and Damodaran Online.
| Industry | SDE Multiple | EBITDA Multiple | Notes |
|---|---|---|---|
| SaaS / Software | 3×–6× | 8×–20× | ARR multiples often higher |
| Healthcare / Medical | 2.5×–5× | 6×–12× | High regulatory moat |
| Professional Services | 1.5×–3× | 5×–8× | Client portability risk |
| E-commerce | 2×–4× | 4×–8× | Depends on brand/margin |
| Manufacturing | 2×–4× | 4×–7× | Asset value floor adds support |
| Construction / Trades | 1.5×–3× | 3×–5× | Owner-dependent discount common |
| Retail (brick & mortar) | 1.5×–2.5× | 3×–5× | Lease liability risk |
| Restaurant / Food Service | 1.5×–2.5× | 2×–4× | High failure rate = low multiple |
| Logistics / Transport | 2×–3.5× | 5×–8× | Contract duration matters |
| Franchise (resale) | 2×–3.5× | 4×–6× | Franchisor approval required |
| Home Services | 2×–3.5× | 4×–7× | Recurring contracts add premium |
| Wholesale / Distribution | 2×–3.5× | 4×–6× | Customer concentration risk |
Tips & Common Valuation Mistakes
| Common Mistake | What to Do Instead |
|---|---|
| Using revenue as the sole valuation basis for a profitable business | Use SDE or EBITDA — profit-based methods always produce more accurate results for businesses with consistent earnings. |
| Forgetting to add back owner salary in the SDE calculation | Owner salary is the largest add-back for most small businesses. Omitting it understates SDE and drastically reduces your valuation. |
| Using a single point estimate as the value | Always present a range (e.g., $800K–$1.2M). The sensitivity table in our calculator shows how the multiple affects value. Use the range in negotiations. |
| Using last year’s earnings when this year is significantly different | Buyers typically look at a 2–3 year average or the most recent 12 months (TTM). Use TTM if performance is improving; use a weighted average if it is variable. |
| Confusing enterprise value with equity value | Enterprise value includes debt. Equity value = Enterprise Value − Total Debt + Cash. If you have significant debt, the final purchase price will reflect equity value, not enterprise value. |
| Overestimating recurring revenue that is actually discretionary | Contracts with auto-renewal clauses and multi-year terms are true recurring revenue. Month-to-month customers who “always come back” are not — buyers will discount these. |
Frequently Asked Questions
How much is my business worth?
Your business value depends on its earnings, growth trajectory, transferability, and the valuation method appropriate for your size and industry. For small businesses, the most reliable estimate is SDE × a market multiple (typically 2×–3×). Use our business valuation calculator above — enter your net profit, owner salary, and any add-backs, then select a multiple based on your business’s quality. For a quick benchmark: multiply your annual SDE by 2.5 and you will be in the right neighborhood for most main street businesses.
What is the SDE method and how is it different from EBITDA?
SDE adds the owner’s salary back to net profit, reflecting what a working owner-operator would earn. It is used for small businesses. EBITDA does not add back owner salary — it assumes professional management will run the business. EBITDA is used for mid-market companies. The same business can have a very different valuation depending on which metric is used, so it is important to match the method to the business size and buyer profile.
What multiple of earnings is a business worth?
The multiple depends on industry, size, and quality. Most small businesses trade at 1.5×–3.5× SDE. Mid-market businesses use EBITDA multiples of 4×–8×. SaaS companies can reach 8×–20× EBITDA or 3×–12× ARR. The IBBA and BizBuySell publish annual median multiple data by industry. Our calculator includes a sensitivity table showing valuation at every multiple level from 1× to 6× so you can see the full range of possible outcomes.
How do I value a startup with no profit?
Pre-profit startups are valued on revenue multiples (typically ARR for SaaS), growth rate, market size, and comparable transactions. Use the Revenue Multiple tab in our calculator. At the seed stage, valuation is often more art than science — driven by team quality, market size, and investor appetite. The Y Combinator seed fundraising guide and comparable recent funding rounds are useful benchmarks for startup-stage companies.
Is a free business valuation calculator accurate?
A free business valuation calculator gives you a reliable directional estimate based on the same formulas used by brokers and advisors. The accuracy depends on the quality of your inputs (clean financials, correct add-backs) and your choice of multiple. The main limitation is that it cannot account for intangibles like brand equity, key-person risk, or proprietary technology. For transactions over $500K, engaging a business broker or certified valuation analyst (CVA) for a formal opinion of value is worth the cost.
What increases business value the most?
The five highest-impact value drivers are: (1) recurring revenue — subscriptions and long-term contracts dramatically increase the multiple; (2) owner independence — a business that runs without you is worth significantly more than one that depends on you; (3) revenue growth — year-over-year growth lifts the multiple even if absolute earnings are the same; (4) customer diversification — no single customer over 15–20% of revenue; (5) documented systems and processes — buyers pay more for businesses with SOPs, trained staff, and a clean information trail.
How do I value a business for a partnership buyout?
Partnership buyouts typically use the same valuation methods — SDE or EBITDA multiple — but the agreed multiple is often negotiated rather than market-driven. Run our calculator on both the low and high end of the applicable multiple range to establish a negotiation range. It is common to engage a neutral third-party appraiser to produce an agreed fair value when partners cannot agree — the cost is usually split between parties.
Related Calculators
If this business valuation calculator helped you understand what your business is worth, these tools complete the financial picture:
- Break-Even Calculator — find the revenue level where your business becomes profitable, which directly drives your SDE and valuation.
- Markup Calculator — optimize your pricing to maximize the SDE that determines your business value.
- Sales Tax Calculator — calculate exact sales tax obligations for deal structuring and due diligence.
- AI ROI Calculator — calculate the return on automation investments that can increase your SDE and raise your valuation multiple.
Understanding what your business is worth is one of the most important steps you can take — whether you are planning to sell, seeking investment, bringing on a partner, or simply benchmarking your progress. Use the business valuation calculator above to get a concrete number, then use the sensitivity table to understand how improving your multiple by even 0.5× can translate into hundreds of thousands of dollars in additional value.