Business Valuation
Estimator

Most small business valuations use Seller’s Discretionary Earnings (SDE) as the primary metric: take your net profit, add back your salary and discretionary owner expenses, then multiply by an industry multiple. A typical small business sells for 1.5–4x SDE depending on industry, growth rate, and owner dependence. This calculator walks you through each step.

Multiples vary significantly by sector. Home services and retail typically command 1.5–2.5x SDE. Professional services (legal, accounting, consulting) are 1–2.5x. Healthcare and medical practices fetch 2–4x. SaaS and software companies are the highest at 3–8x SDE due to recurring revenue and scalability. Your specific multiple is adjusted down if the business has high owner dependence, customer concentration, or declining trends.

SDE (Seller’s Discretionary Earnings) adds back the owner’s full salary and benefits to net profit, while EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) only adds back depreciation. SDE is typically 1.5–2x higher than EBITDA for owner-operated businesses because it includes the cost of replacing the owner’s labor. Use SDE for businesses under $5M revenue; use EBITDA for larger businesses ($5M+ revenue) where owner salary is already market-rate.

A business generating $100K in SDE is typically worth $150K–$400K using the SDE multiple method, depending on industry. A landscaping business at 1.5x might be worth $150K, while a healthcare practice at 3x might be worth $300K, and a SaaS business at 4x+ could be worth $400K–$600K. A pure revenue multiple approach (revenue × multiplier) yields different results and is most relevant for SaaS, ecommerce, or agencies where revenue is highly recurring.

A quick estimate using a calculator like this takes under 2 minutes. A formal appraisal from a Certified Business Appraiser (CBA) takes 2–4 weeks and costs $2,000–$10,000 depending on business complexity. A broker’s opinion of value (BOV) from a business broker takes 1–2 weeks and is often free or low-cost as part of a listing engagement. Full M&A advisory valuation for larger deals can take 4–8 weeks.

You don’t need a CPA for a self-serve estimate, but you will need one for a credible sale. CPA-prepared financials (three years of tax returns and P&L statements) are the minimum documentation buyers and lenders will require. For the valuation itself, a CPA can help recast earnings (adjust owner salary to market rate, remove personal expenses). For formal valuations, a Certified Business Appraiser (CBA) or CVA (Certified Valuation Analyst) is more appropriate than a general CPA.

A business valuation is a calculated estimate of value based on financials, market data, and methodology (SDE multiple, EBITDA multiple, etc.). A formal appraisal is a documented report produced by a credentialed professional (CBA, CVA) that holds up to legal and financial scrutiny. For selling a business under $5M, a broker’s opinion of value is often sufficient. For SBA financing, litigation, or divorce proceedings, you need a formal written appraisal with supporting documentation.

Buyers typically work from two angles: (1) What return does this business generate on my investment? A buyer seeking 2-year ROI will target a lower price than one seeking 4-year ROI. (2) What is the market paying for similar businesses? They benchmark against comparable sales (comps) in your industry and geography. Most buyers apply a multiple to SDE or EBITDA and then adjust up or down for qualitative factors: customer concentration, growth trajectory, systems maturity, and owner dependence.

You can sell without a formal valuation, but it’s risky. Without a valuation, sellers tend to overprice (leading to a stale listing) or underprice (leaving money on the table). Even a rough self-serve estimate from a tool like this gives you a defensible number to start negotiations. A buyer who knows you haven’t done your homework will lowball. At minimum, get a broker’s opinion of value before listing — most brokers provide this free when you sign a listing agreement.

For an informal self-estimate: last 12 months P&L and balance sheet. For a formal appraisal: 3 years of business tax returns (1120, 1065, or Schedule C), 3 years of P&L statements, current balance sheet, AR and AP aging reports, inventory list (if applicable), and equipment/asset schedule. Optional but helpful: monthly bank statements, customer contract summaries, and a recap of owner benefits (car, phone, health insurance) that get added back to earnings.

Owner dependence is one of the biggest valuation adjusters. If the business cannot run profitably without you personally (60+ hours/week, specialized knowledge, key customer relationships), buyers will discount 20–40% from the base multiple. A business with documented processes, trained staff, and systems that allow absentee ownership commands a premium. Reducing owner dependence before selling — by hiring a manager and documenting operations — is one of the highest-ROI moves a seller can make.

SDE = Net Profit + Owner Salary + Owner Benefits + Discretionary Expenses. It adds back: your salary above market rate, health insurance premiums paid by the business, auto allowance, life insurance, travel expenses that are personal, one-time repairs, and any expense that benefits you personally but isn’t essential to running the business. It does not include: capital expenditures, debt service, depreciation, or income taxes. A CPA familiar with business sales can help you prepare a proper SDE recast.