This is an estimate based on the SDE Multiplier method. Consult a professional broker for an official appraisal.
function calculateBusinessValuation() {
var sde = parseFloat(document.getElementById('val_sde').value);
var multiplier = parseFloat(document.getElementById('val_multiplier').value);
var inventory = parseFloat(document.getElementById('val_inventory').value) || 0;
var debt = parseFloat(document.getElementById('val_debt').value) || 0;
if (isNaN(sde) || isNaN(multiplier)) {
alert("Please enter valid numbers for SDE and Multiplier.");
return;
}
// Logic: (SDE * Multiplier) + Inventory – Debt
var baseValue = sde * multiplier;
var finalValue = baseValue + inventory – debt;
if (finalValue < 0) finalValue = 0;
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
document.getElementById('val-final-amount').innerHTML = formatter.format(finalValue);
document.getElementById('val-result-container').style.display = 'block';
}
How to Value a Small Business: The SDE Multiplier Method
Determining the value of a small business is a critical step whether you are planning to sell your company or looking to acquire one. Unlike large corporations valued on EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), most small businesses are valued using Seller's Discretionary Earnings (SDE).
What is Seller's Discretionary Earnings (SDE)?
SDE is a financial metric used to determine the true "benefit" a business provides to a single full-time owner. It is calculated by taking your net profit and "adding back" certain expenses that a new owner might not incur or that are personal to the current owner. Common add-backs include:
The owner's salary and payroll taxes.
Personal health insurance premiums paid by the business.
One-time legal or professional fees.
Depreciation and Amortization (non-cash expenses).
Interest expenses on business loans.
Choosing the Right Multiplier
The multiplier is the most subjective part of the valuation. For most small businesses, the multiplier falls between 2.0 and 4.0. Several factors influence where your business lands on this scale:
Transferability: Can the business run without the current owner? If yes, the multiplier is higher.
Growth Trends: A business with increasing year-over-year revenue is worth more.
Customer Concentration: If one customer represents 50% of your revenue, your risk is higher and your multiplier will be lower.
Valuation Example
Imagine a local landscaping company with the following financials:
Net Profit: $80,000
Owner Salary: $60,000
Depreciation: $10,000
Total SDE: $150,000
If the industry average multiplier for landscaping is 2.5x and the company has $20,000 worth of equipment (inventory), the valuation would be:
($150,000 x 2.5) + $20,000 = $395,000.
Why This Calculator Matters
Using a Business Valuation Calculator allows owners to set realistic expectations. Overvaluing a business can lead to years of it sitting on the market, while undervaluing it leaves hard-earned money on the table. Use this tool as a starting point for your exit planning strategy or your next investment analysis.