Business Valuation Calculator

What is a business valuation?

A business valuation estimates what a company would sell for today. For established, profitable businesses — unlike early-stage startups — the value is anchored to the cash the business actually produces, expressed as a multiple of its earnings or revenue. Buyers, lenders, and the IRS all lean on the same logic: a business is worth what a rational buyer would pay for its future earnings, discounted for the risk that those earnings won't continue.

How a business is valued

• Earnings method: value = adjusted earnings (SDE or EBITDA) × multiple
• Revenue method: value = annual revenue × revenue multiple
• Both are shown as a range, because multiples are negotiated

A worked example

A business with $200,000 in adjusted earnings (SDE) at a 3× multiple is worth about $600,000, with a realistic band of roughly $480,000–$720,000. The same business on a 1× revenue multiple against $1M of sales lands near $1M — which is why the earnings method, tied to actual profit, is the more conservative anchor for most owner-operated businesses.

SDE vs. EBITDA: which earnings to use

The right earnings figure depends on the size of the business. Seller's Discretionary Earnings (SDE)adds the owner's salary and personal perks back to profit, capturing the total benefit to a single owner-operator — it is the standard for main-street businesses under roughly $1M in earnings, which typically trade at 2–4× SDE. EBITDA (earnings before interest, taxes, depreciation, and amortization) does not add back a market-rate manager's salary and is used for larger businesses with a management team in place; those command higher multiples because the buyer isn't buying a job.

What raises or lowers the multiple

Two businesses with identical profit can sell for very different prices. Buyers pay a premium for recurring revenue, a diversified customer base (no single client above ~10–15% of sales), documented systems, clean and verifiable financials, and an operation that runs without the owner. Multiples get discounted for heavy owner-dependence, customer concentration, declining revenue, messy books, or a business in a shrinking market. Improving these before a sale often moves the price more than another year of growth.

What drags a valuation down

• Not normalizing earnings. Add back owner salary, one-time costs, and personal expenses to show the true earning power a buyer inherits.
• Using a headline multiple blindly. Industry averages are a starting point, not your number — size, growth, and risk shift it.
• Ignoring working capital and debt. Most deals are “cash-free, debt-free,” and a normal level of working capital is expected to transfer.
• Confusing revenue with value. A high-revenue, low-margin business can be worth less than a smaller, highly profitable one.

Valuing a fast-growing startup is a different exercise — for that, use the startup valuation calculator, and read our guide on how to value a startup.