Business Valuation Calculator

Small business valuation determines what a business is worth as a going concern. Several methods exist, and which one fits 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.

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

Used when profitability is low but revenue is significant (growth-stage businesses).

The multiples this calculator uses

Two different multiples apply to two different numbers, and mixing them up is the single most common error in small-business valuation. Revenue multiples apply to top-line sales. SDE multiples apply to seller’s discretionary earnings, which is a far smaller number, so the multiple is larger. These are the figures behind the industry dropdown below:

Ranges that wide are not a failure of the method. Two restaurants with identical revenue can be worth $200,000 apart on the strength of the lease alone, and a buyer will pay far more for a business that runs without the owner in it than for one that is the owner.

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. Going-concern value of $310K far exceeds the $75K of assets, so the earnings method is the right one here. When the two come out the other way round, the business is worth more broken up than run, and that is a different conversation entirely.

When the two methods disagree

Feed a business with high revenue and thin earnings into this calculator and the revenue range and the SDE range will barely overlap. That gap is information, not noise. A restaurant turning over $800,000 with $60,000 of SDE is being valued at $240,000 to $800,000 on revenue and $90,000 to $180,000 on earnings, and a buyer will anchor on the lower pair every time. Revenue multiples only carry a deal when the buyer believes the margin is fixable.