Free tool · Money & pricing
Business valuation calculator
Most small businesses are valued as a multiple of seller's discretionary earnings (SDE): net profit plus the owner's salary, perks and one-off costs added back. Enter your figures and a low and high multiple to get a valuation range — then read below why the multiple matters more than the math.
Estimated value
$246,000–$369,000
Seller's discretionary earnings × your multiple range.
- Seller's discretionary earnings (SDE)
- $123,000
- SDE margin
- 30.8%
- Midpoint value
- $307,500
- Implied revenue multiple
- 0.62–0.92×
SDE multiple method
- SDE = Net profit + Owner salary & perks + One-off expenses
- Low valuation = SDE × Low multiple
- High valuation = SDE × High multiple
- SDE margin = SDE ÷ Revenue × 100
What SDE is and why buyers use it
Seller's discretionary earnings is the total cash benefit one full-time owner-operator takes out of the business. Small businesses often run the owner's salary, car, phone and health insurance through the company, which makes net profit look smaller than the real earning power.
Adding those back gives a buyer a like-for-like number: what they would earn if they stepped into your role. Add back only what a new owner would not have to pay — a manager you would need to hire to replace yourself is a real cost, not an add-back.
Worked example
A commercial cleaning company has $400,000 of revenue and $60,000 of net profit. The owner pays herself $55,000 and runs $8,000 of personal vehicle and phone costs through the business, and spent $7,000 on a one-time legal dispute.
SDE = $60,000 + $63,000 + $7,000 = $130,000, a 32.5% SDE margin. At the calculator's default 2–3× range, that suggests $260,000 to $390,000. A buyer and broker would then argue about where in — or outside — that range the business belongs.
What moves the multiple
Multiples vary by industry, size, growth and risk, and this calculator deliberately does not supply market averages — set the range from recent comparable sales, a business broker or an appraiser. Factors that tend to raise or lower a multiple:
- Owner dependence: a business that runs without you is worth more than one built on your personal relationships.
- Recurring revenue: contracts and subscriptions are worth more than one-off jobs.
- Customer concentration: one client providing a third of revenue is a risk discount.
- Trend: three years of growth supports a higher multiple than flat or falling numbers.
- Clean books: documented add-backs survive due diligence; vague ones get deducted.
Frequently asked questions
How do you value a small business?
Small owner-operated businesses are commonly valued as a multiple of seller's discretionary earnings. Larger companies with management teams are more often valued on EBITDA multiples, discounted cash flow or asset value.
What is a typical SDE multiple?
It depends heavily on industry, size, growth, owner dependence and risk, so there is no single typical figure. Use recent sales of comparable businesses or a broker's opinion rather than a general rule.
What can be added back to SDE?
The owner's salary and payroll taxes for one owner, personal expenses run through the business, one-time costs that will not recur, and often interest, depreciation and amortization. Every add-back should be documented.
Is SDE the same as EBITDA?
No. EBITDA assumes a paid manager runs the business, so it does not add back the owner's salary. SDE adds back one owner's compensation, which is why it is used for small owner-run businesses.