Business Valuation Calculator
Estimate the market value of your business using the SDE (Seller's Discretionary Earnings) method.
Estimated Business Value
Total SDE: $0
$0
*This is a rough estimate. Professional appraisals are recommended for legal sales.
How to Calculate What a Business is Worth
Determining the value of a business is both a science and an art. While large corporations are often valued based on EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), small to mid-sized businesses typically use Seller's Discretionary Earnings (SDE).
The SDE Method Formula
The SDE method calculates the total financial benefit a single owner-operator derives from the business. The formula used in this calculator is:
(Annual Net Profit + Owner's Salary/Add-backs) × Industry Multiple + Inventory = Total Value
Key Components of Valuation
- Annual Net Profit: This is the "bottom line" profit after all standard operating expenses have been paid.
- Owner Salary & Add-backs: This includes the salary the owner pays themselves, personal travel, health insurance, and one-time expenses that a new owner wouldn't necessarily incur.
- Industry Multiple: Most small businesses sell for 1.5x to 4x their SDE. A service business might have a lower multiple, while a SaaS or high-growth manufacturing company might have a much higher one.
- Inventory/Assets: Saleable inventory and tangible equipment are usually added on top of the earnings-based value.
Real-World Example
Suppose you own a local landscaping company. Your annual net profit is $100,000, and you pay yourself a salary of $70,000. Your SDE is $170,000. If the industry standard multiple for landscaping is 2.0x, the earnings value is $340,000. If you have $40,000 worth of trucks and equipment, the total estimated business worth would be $380,000.