Business Valuation Calculator

Small business valuation determines what a business is worth as a going concern. Multiple methods are used — the most appropriate depends on the business type, profitability, and industry.

Method 1 — Earnings Multiple (most common for profitable small businesses): Value = SDE × Industry Multiple

SDE (Seller’s Discretionary Earnings): SDE = Net Profit + Owner’s Salary + Non-Cash Expenses + One-Time Expenses − One-Time Income

SDE represents the total economic benefit to a single full-time owner-operator.

Typical SDE multiples by business type:

• Service businesses (low assets): 1.5–2.5×
• Retail (brick & mortar): 1.5–3.0×
• E-commerce: 2.0–4.0×
• SaaS / subscription: 3.0–8.0× (or higher by ARR)
• Professional practice (medical, dental): 0.5–1.5× revenue
• Manufacturing: 3.0–5.0×
• Restaurant: 0.3–0.7× annual revenue (or 1.5–3× SDE)

Method 2 — Revenue Multiple: Value = Annual Revenue × Revenue Multiple

Used when profitability is low but revenue is significant (growth-stage businesses). Typical revenue multiples: 0.3×–2.0× for most small businesses; 3×–10× for SaaS.

Method 3 — Asset-Based Valuation: Value = Total Business Assets − Total Business Liabilities

Used for asset-heavy businesses or those being liquidated.

Method 4 — DCF (Discounted Cash Flow): Value = Σ [Cash Flow_year / (1 + r)^year] + Terminal Value

Best for businesses with predictable multi-year cash flows. Discount rate (r) = 15–25% for small businesses (reflects illiquidity risk).

Worked example — SDE method: Pizza restaurant. Net profit: $80,000/year. Owner salary: $55,000. Depreciation (non-cash): $12,000. One-time legal fee: $8,000.

• SDE = $80,000 + $55,000 + $12,000 + $8,000 = $155,000
• Industry multiple (restaurant): 2.0×
• Estimated value: $155,000 × 2.0 = $310,000

Asset check: kitchen equipment, furniture, leasehold improvements = $95,000 in assets. Liabilities: $20,000 loan. Asset value = $75,000. Since going-concern value ($310K) far exceeds asset value ($75K) — the earnings method is correct here.