Business Valuation Calculator
Estimate the fair market selling price of your company using SDE multiples, EBITDA benchmarks, and revenue valuations.
Financial & Business Metrics
Estimated Market Valuation
How Businesses Are Valued: SDE vs. EBITDA
In mergers and acquisitions (M&A), business valuation evaluates earnings power, growth trajectory, risk profile, and cash flow predictability.
For deeper analysis and related planning, you can also explore our Profit Margin Calculator and Gross Margin Calculator.
- Seller's Discretionary Earnings (SDE): $\text{SDE} = \text{Net Profit} + \text{Owner Salary} + \text{Discretionary Perks} + \text{Interest} + \text{Taxes} + \text{Depreciation} + \text{One-Time Expenses}$. SDE is the gold standard metric for small businesses where a single owner-operator manages day-to-day operations.
- EBITDA: Used for middle-market businesses (typically generating over $1M-$2M in net operating profit). EBITDA assumes professional executive salaries are already fully expensed.
Industry Multiple Benchmarks
| Industry | Typical SDE Multiple | Typical EBITDA Multiple | Key Value Drivers |
|---|---|---|---|
| SaaS / Cloud Software | 3.5x to 5.5x | 6.0x to 12.0x | Net revenue retention, high gross margins (>75%), low churn |
| B2B Professional Services | 2.2x to 3.2x | 4.5x to 6.5x | Client contracts, retainer predictability, certified staff |
| Healthcare / Dental Clinics | 2.5x to 3.8x | 5.0x to 7.5x | Patient retention, insurance contracts, modern diagnostic tech |
| Construction & Skilled Trades | 1.8x to 2.8x | 3.5x to 5.5x | Commercial service contracts, bonding capacity, fleet condition |
| E-Commerce Brands | 2.0x to 3.5x | 4.0x to 6.0x | Proprietary trademarks, repeat customer rate, supply chain resilience |
| Restaurants & Retail | 1.5x to 2.5x | 3.0x to 4.5x | Prime lease terms, local brand loyalty, operational SOPs |
Frequently Asked Questions
What is the difference between SDE and EBITDA in business valuation?
Seller's Discretionary Earnings (SDE) is used for owner-operated small businesses generating under $1M-$2M in earnings. SDE adds back the owner's salary, personal discretionary perks, and non-operational expenses to reflect total cash benefit to a single owner. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is used for larger lower-middle-market companies where management is handled by salaried executives.
What multiples are typical for small businesses?
Most profitable small businesses sell for between 2.0x and 3.5x SDE. Companies with documented management systems, recurring contractual revenue, and low customer concentration command multiples of 3.5x to 5.0x+ SDE or 5.0x to 8.0x EBITDA.
How does owner dependence affect business value?
High owner dependence introduces key person risk, which significantly discounts valuation multiples (often by 15-30%). If a business cannot operate profitably without the owner personally managing sales or operations, prospective buyers and SBA lenders perceive high transition risk.
What is an add-back in SDE calculation?
An add-back is an expense listed on your profit and loss statement that will not continue under a new owner. Common add-backs include owner compensation, owner health and life insurance, personal vehicle use, one-time legal settlements, personal travel/meals, and family member above-market wages.
How does recurring revenue increase business valuation?
Recurring revenue (such as monthly software subscriptions, annual service contracts, or maintenance retainers) dramatically lowers revenue volatility. Buyers and lenders are willing to pay a premium multiple because future cash flows are predictable rather than dependent on constant new customer acquisition.
What is the difference between an Asset Sale and a Stock Sale?
In an asset sale (the most common structure for small business acquisitions), the buyer purchases specific operational assets (equipment, inventory, customer lists, IP) and leaves behind prior liabilities and debts. In a stock sale, the buyer acquires the legal entity itself, including all historical unknown liabilities.