Estimate the market value of your business using the SDE Multiplier method.
1.5x – Service (Solo/Low Barrier)
2.0x – General Service / Retail
2.5x – Established Professional Service
3.0x – Manufacturing / B2B SaaS
3.5x – High Growth / Scalable Tech
4.0x – Specialized Tech / IP Heavy
Estimated Business Value
$0
Understanding Small Business Valuation (SDE Method)
Valuing a small business is more of an art than a science, but the most common approach for companies with annual revenue under $5 million is the Seller's Discretionary Earnings (SDE) method. This calculator uses this industry-standard formula to help owners and buyers find a realistic "asking price" starting point.
What is SDE (Seller's Discretionary Earnings)?
SDE represents the total financial benefit a single owner-operator derives from the business. Unlike EBITDA, which is used for larger corporations, SDE "adds back" certain expenses to show the true earning power. Common add-backs include:
Owner's base salary and bonuses
Health insurance and retirement contributions
Personal travel or vehicle expenses paid by the business
One-time legal fees or non-recurring equipment repairs
The Formula: (Net Profit + Owner Salary + Add-backs) × Industry Multiplier + Saleable Inventory = Total Business Value
Choosing the Right Multiplier
The multiplier is a reflection of risk and stability. Most small businesses trade between 1.5x and 3.5x SDE. Factors that increase your multiplier include:
Recurring Revenue: Subscription models or long-term contracts.
Low Owner Dependency: A business that runs without the owner's daily involvement.
Growth Potential: A clear path to scaling in the current market.
Inventory and Assets
In most small business transactions, "Saleable Inventory" is added on top of the calculated multiple. This ensures that the buyer is paying for the liquid assets (stock) separately from the goodwill and earning capacity of the enterprise.
function calculateValuation() {
var netProfit = parseFloat(document.getElementById('annualNetProfit').value);
var ownerSalary = parseFloat(document.getElementById('ownerSalary').value);
var multiplier = parseFloat(document.getElementById('industryMultiplier').value);
var inventory = parseFloat(document.getElementById('inventoryValue').value);
// Default to 0 if inputs are empty or invalid
if (isNaN(netProfit)) netProfit = 0;
if (isNaN(ownerSalary)) ownerSalary = 0;
if (isNaN(inventory)) inventory = 0;
// SDE Calculation
var sde = netProfit + ownerSalary;
// Valuation Calculation
var baseValuation = sde * multiplier;
var totalValue = baseValuation + inventory;
// Formatting
var formattedValue = totalValue.toLocaleString('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
var formattedSDE = sde.toLocaleString('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
// Update UI
document.getElementById('finalValuation').innerText = formattedValue;
document.getElementById('valuationBreakdown').innerHTML =
"Based on an SDE of " + formattedSDE + " and a " + multiplier + "x multiplier, plus $" + inventory.toLocaleString() + " in inventory/assets.";
document.getElementById('resultContainer').style.display = 'block';
// Smooth scroll to result
document.getElementById('resultContainer').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}