Estimate the market value of your business using the EBITDA/SDE multiple method.
Estimated Business Valuation
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How Business Valuation is Calculated
Valuing a small to medium-sized business typically involves determining the "Earnings" of the company and applying a "Multiplier" that reflects the industry standard and the business's stability. Our calculator uses the Asset-Adjusted Multiple Method.
Key Components of the Calculation
EBITDA/SDE: This stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. For small businesses, we often use Seller's Discretionary Earnings (SDE), which is the total financial benefit an owner-operator derives from the business.
Industry Multiplier: This number represents how many years of profit a buyer is willing to pay upfront. Most small businesses sell for between 1.5x and 4x their SDE. Tech companies or high-growth sectors may see 5x to 10x.
Adjustments: Once the "Core Value" (Profit x Multiplier) is determined, we add liquid assets like Cash on Hand and the wholesale value of Inventory, then subtract any Business Debt to arrive at the final Enterprise Value.
Real-World Example
Imagine a local landscaping company with the following metrics:
Annual Profit (SDE): $100,000
Multiplier: 2.5 (Standard for stable service businesses)
Inventory (Equipment/Supplies): $40,000
Debt: $10,000
The Calculation: ($100,000 x 2.5) + $40,000 – $10,000 = $280,000. This represents a fair asking price in many market conditions.
Factors That Increase Your Multiplier
If you want to increase the value of your business, focus on these "multiplier drivers":
Recurring Revenue: Subscription models are worth more than one-off sales.
Owner Independence: A business that runs without the owner's daily involvement is more valuable.
Diverse Customer Base: Having no single customer representing more than 10% of revenue reduces risk.
function calculateBusinessValue() {
// Get Input Values
var profit = parseFloat(document.getElementById('annualProfit').value);
var multiplier = parseFloat(document.getElementById('industryMultiplier').value);
var cash = parseFloat(document.getElementById('cashInBank').value) || 0;
var inventory = parseFloat(document.getElementById('inventoryValue').value) || 0;
var debt = parseFloat(document.getElementById('totalDebt').value) || 0;
// Validation
if (isNaN(profit) || isNaN(multiplier)) {
alert("Please enter at least the Annual Profit and the Industry Multiplier.");
return;
}
// Calculation Logic
// Core Value = Profit * Multiplier
// Adjusted Value = Core Value + Cash + Inventory – Debt
var coreValue = profit * multiplier;
var enterpriseValue = coreValue + cash + inventory – debt;
// Handle Negative Value Case
if (enterpriseValue < 0) {
enterpriseValue = 0;
}
// Format Result as Currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
// Display Result
document.getElementById('finalValuation').innerText = formatter.format(enterpriseValue);
document.getElementById('resultContainer').style.display = 'block';
// Smooth scroll to result
document.getElementById('resultContainer').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}