Texas Car Tax Calculator

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Business Valuation Calculator

Estimate the market value of your business using the Seller's Discretionary Earnings (SDE) Multiplier Method.

Estimated Business Enterprise Value:
$0.00

How Business Valuation Works

Determining the value of a small to medium-sized business is often done through the Earnings Multiple Method. This approach looks at the financial benefit an owner-operator receives and applies a multiplier based on industry standards, risk, and growth potential.

What is SDE (Seller's Discretionary Earnings)?

SDE is the total financial benefit a single owner-operator derives from the business. It is calculated by taking the net profit and "adding back" certain expenses like:

  • The owner's salary
  • Interest expenses on loans
  • Depreciation and amortization (non-cash expenses)
  • One-time non-recurring expenses
  • Personal expenses run through the business

Understanding the Multiplier

The multiplier represents how many years of profit a buyer is willing to pay upfront. Most small businesses sell for between 1.5 and 3.5 times SDE. High-growth tech companies or highly stable medical practices may see multipliers of 4.0 or higher.

Realistic Valuation Example

Imagine a local landscaping company with the following financials:

  • Annual SDE: $120,000
  • Industry Multiplier: 2.0 (standard for service businesses)
  • Inventory/Equipment: $40,000
  • Business Debt: $10,000

The calculation would be: ($120,000 × 2.0) + $40,000 – $10,000 = $270,000.

Key Factors That Increase Your Value

To secure a higher multiplier, focus on reducing owner dependency, diversifying your customer base, and maintaining clean financial records. Buyers pay a premium for businesses that can run successfully without the current owner's daily involvement.

function calculateBusinessValuation() { var sde = parseFloat(document.getElementById('val_sde').value); var multiplier = parseFloat(document.getElementById('val_multiplier').value); var assets = parseFloat(document.getElementById('val_assets').value) || 0; var debt = parseFloat(document.getElementById('val_liabilities').value) || 0; if (isNaN(sde) || isNaN(multiplier)) { alert('Please enter valid numbers for SDE and Multiplier.'); return; } if (multiplier < 0 || sde < 0) { alert('Values cannot be negative.'); return; } // Logic: (Earnings * Multiplier) + Assets – Debts var earningsValue = sde * multiplier; var totalValue = earningsValue + assets – debt; if (totalValue < 0) totalValue = 0; var resultDisplay = document.getElementById('val_final_score'); var container = document.getElementById('val_result_container'); var breakdown = document.getElementById('val_breakdown'); resultDisplay.innerText = '$' + totalValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); breakdown.innerHTML = 'Calculation: ($' + sde.toLocaleString() + ' earnings × ' + multiplier + ') + $' + assets.toLocaleString() + ' assets – $' + debt.toLocaleString() + ' debt.'; container.style.display = 'block'; // Smooth scroll to result container.scrollIntoView({ behavior: 'smooth', block: 'nearest' }); }

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