How Small Business Valuation Calculator Works
The Small Business Valuation Calculator estimates what your business is worth using five established valuation methods and benchmark multiples from over 30 industries. Whether you're preparing to sell, seeking investors, buying out a partner, or simply tracking your business's growth, this tool provides a defensible range of values without the $5,000-$15,000 cost of a formal appraisal.
The five methods included are: (1) Seller's Discretionary Earnings (SDE) multiple, the standard for businesses under $5M in revenue; (2) EBITDA multiple, common for larger businesses; (3) Revenue multiple, useful for high-growth or pre-profit companies; (4) Asset-based valuation, which sums tangible and intangible assets minus liabilities; and (5) Discounted Cash Flow (DCF), which projects future earnings and discounts them to present value.
For each method, the calculator applies industry-specific multiples sourced from transaction databases and market data. A restaurant might trade at 2-3x SDE while a SaaS company commands 5-10x revenue. The tool lets you adjust multiples based on business-specific factors like customer concentration, owner dependency, recurring revenue percentage, and growth trajectory.
The final output presents a valuation range across all applicable methods, highlights which methodology is most appropriate for your business type, and flags factors that could increase or decrease value to a buyer. Use the Free Invoice Generator to organize your revenue records, or pair with the Freelance Rate Calculator if you're valuing a solo consulting practice.
Key Terms Explained
- Seller's Discretionary Earnings (SDE)
- Net income plus owner's salary, benefits, one-time expenses, and non-cash charges—representing the total financial benefit to a single owner-operator.
- EBITDA
- Earnings Before Interest, Taxes, Depreciation, and Amortization—a proxy for operating cash flow used to compare businesses regardless of capital structure.
- Valuation Multiple
- A factor applied to earnings or revenue based on industry benchmarks and comparable transactions to estimate business value.
- Discounted Cash Flow (DCF)
- A valuation method that projects future cash flows and discounts them back to today's dollars using a required rate of return.
- Terminal Value
- The estimated value of a business beyond the explicit forecast period, often representing 60-80% of total DCF value.
- Goodwill
- The intangible value of a business above its net tangible assets, reflecting brand, customer relationships, and operational systems.
Who Needs This Tool
Estimating sale price 2-3 years before listing to identify value-building opportunities and set a realistic asking price.
Determining fair value for one partner's share when restructuring ownership of a jointly-held business.
Preparing for a fundraising round by understanding how VCs will value the company based on revenue multiples and growth rate.
Validating an asking price against multiple valuation methods before making an acquisition offer.
Establishing business value for succession planning, gifting strategies, or buy-sell agreement funding.
Methodology & Formulas
SDE Valuation = Seller's Discretionary Earnings × Industry SDE Multiple. EBITDA Valuation = EBITDA × Industry EBITDA Multiple. Revenue Valuation = Annual Revenue × Industry Revenue Multiple. Asset-Based = Total Assets (fair market value) - Total Liabilities. DCF = Sum of projected annual cash flows for 5 years, each discounted by (1 + discount rate)^year, plus a terminal value calculated as Year 5 cash flow × (1 + growth rate) / (discount rate - growth rate), discounted to present. The final range is the interquartile spread across applicable methods.
Pro Tips
- Use SDE for owner-operated businesses under $5M revenue and EBITDA for larger companies with professional management.
- Adjust your multiple downward if more than 20% of revenue comes from a single client—buyer concentration risk lowers value.
- Recurring revenue (subscriptions, retainers) commands 20-50% higher multiples than one-time project revenue in the same industry.
- Clean up your financials 2-3 years before a sale: separate personal expenses, document add-backs, and show consistent growth.
- Run all five methods and focus on the range rather than a single number—the overlap between methods is where true value likely sits.