Personal Loan Amortization Calculator

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Small Business Valuation Calculator

Seller's Discretionary Earnings (Net Profit + Add-backs)
Typical range: 2.0x to 4.0x for small businesses
Current saleable stock value
Outstanding liabilities to be cleared

Estimated Business Value

function calculateValuation() { var sde = parseFloat(document.getElementById('sdeInput').value); var multiple = parseFloat(document.getElementById('multipleInput').value); var inventory = parseFloat(document.getElementById('inventoryInput').value) || 0; var debt = parseFloat(document.getElementById('debtInput').value) || 0; if (isNaN(sde) || isNaN(multiple)) { alert('Please enter valid numbers for SDE and Industry Multiple.'); return; } var goodwillValue = sde * multiple; var totalValue = goodwillValue + inventory – debt; var resultDiv = document.getElementById('valuationResult'); var valueDisplay = document.getElementById('finalValue'); var breakdownDisplay = document.getElementById('valuationBreakdown'); resultDiv.style.display = 'block'; valueDisplay.innerText = '$' + totalValue.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); breakdownDisplay.innerHTML = 'Calculation Breakdown:' + 'Earnings Multiple (' + multiple + 'x SDE): $' + goodwillValue.toLocaleString() + " + '+ Inventory: $' + inventory.toLocaleString() + " + '- Outstanding Debt: $' + debt.toLocaleString(); }

Understanding Small Business Valuation

Valuing a small business is a blend of financial science and market art. For most Main Street businesses (revenues under $5M), the most common methodology is the SDE Multiple Method. This approach calculates the total financial benefit an owner-operator receives from the business and applies a market-driven multiplier to arrive at a fair price.

What is SDE (Seller's Discretionary Earnings)?

Unlike EBITDA used for larger corporations, SDE is the standard for small businesses. It represents the total earnings available to a single owner. To calculate SDE, start with your net profit and "add back" specific expenses:

  • Owner's salary and payroll taxes
  • Non-cash expenses (depreciation and amortization)
  • Interest expenses on business loans
  • One-time personal expenses run through the business (e.g., personal travel, health insurance)
  • Non-recurring expenses (e.g., a one-time legal settlement)

How to Choose the Right Multiple

The industry multiple is the most sensitive variable in your valuation. While the average small business sells for between 2.0x and 3.5x SDE, several factors can push this number higher or lower:

  • Risk: Is the business overly dependent on the current owner? High owner-dependence lowers the multiple.
  • Growth: Are year-over-year revenues increasing or stagnant?
  • Location & Assets: Prime real estate or proprietary equipment increases value.
  • Customer Concentration: If one customer represents 40% of sales, the risk is higher, and the multiple drops.

Valuation Example

Imagine a local HVAC company with the following financials:

  • Annual Net Profit: $100,000
  • Owner Salary: $70,000
  • Depreciation: $10,000
  • Total SDE: $180,000
  • Industry Multiple: 2.5x
  • Inventory: $20,000
  • Estimated Value: ($180,000 × 2.5) + $20,000 = $470,000

Why Add Inventory Separately?

In many asset-heavy industries like retail or manufacturing, the business value is calculated as "Multiple + Inventory." This is because inventory levels can fluctuate significantly based on seasonality. Most transactions are structured as "Value + Inventory at Cost" at the time of closing to ensure the buyer receives a working operation with sufficient stock.

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