Business Valuation Calculator
Estimate your business's fair market value using industry-standard methods
SDE = Net Profit + Owner's Salary + Discretionary Expenses
Typical range: 1.0x - 4.0x for small businesses/e-commerce
How to Use This Tool
Select your preferred valuation method from the dropdown menu: SDE Multiple for small businesses and e-commerce stores, EBITDA Multiple for mid-sized operations, or Asset-Based for asset-heavy businesses like manufacturing or retail with significant physical assets.
Fill in the required fields for your selected method: enter earnings figures, industry multiples, or asset/liability totals as prompted. Hover over input hints for definitions of terms like SDE and EBITDA if needed.
Click the Calculate Valuation button to generate results. Review the detailed breakdown including estimated value, method used, and calculation steps. Use the Reset button to clear all fields and start over, or Copy Results to save your valuation summary.
Formula and Logic
Each valuation method uses industry-standard formulas tailored to common business types:
- SDE Multiple: Valuation = Annual Seller's Discretionary Earnings × Industry SDE Multiple. SDE represents the total financial benefit a single owner would receive from the business, including net profit, owner's salary, and discretionary expenses (e.g., personal travel, non-essential subscriptions).
- EBITDA Multiple: Valuation = Annual EBITDA × Industry EBITDA Multiple. EBITDA measures operating performance by excluding interest, taxes, depreciation, and amortization, making it comparable across businesses with different capital structures.
- Asset-Based: Valuation = Total Business Assets - Total Business Liabilities. This method calculates the net asset value of the business, best suited for companies where asset value exceeds earnings potential (e.g., real estate holding companies, equipment rental businesses).
Multiples are derived from recent sales of similar businesses in your industry, available via industry reports or business broker databases.
Practical Notes
Valuation multiples vary widely by industry: e-commerce stores typically trade at 1.5x-3x SDE, while SaaS businesses may reach 4x-8x EBITDA. Check industry benchmarks from sources like BizBuySell or IBISWorld for accurate multiple ranges.
For small businesses, SDE is more relevant than EBITDA because it accounts for owner-specific compensation and discretionary spending that a new owner could adjust. Always adjust SDE to remove one-time expenses (e.g., lawsuit settlements, major equipment repairs) before applying a multiple.
Asset-based valuations do not account for intangible assets like brand reputation, customer lists, or intellectual property unless they are explicitly included in total assets. Consider adding a premium for strong intangible assets if using this method.
Valuations are estimates only: always consult a certified business appraiser or broker for formal valuations used in legal proceedings, bank loans, or major transactions.
Why This Tool Is Useful
Entrepreneurs preparing to sell their business can use this tool to set a realistic asking price, avoiding overpricing that delays sales or underpricing that loses value.
E-commerce sellers and traders can benchmark their business value against industry peers, track value growth over time, or determine fair value for partnership buy-ins or buy-outs.
Small business owners seeking investment can present data-backed valuation estimates to potential investors, demonstrating understanding of their business's financial standing.
Business brokers and sales teams can use this tool to quickly generate preliminary valuations for client consultations, saving time on manual calculations.
Frequently Asked Questions
What is a good SDE multiple for a small e-commerce store?
Most small e-commerce stores trade at 1.5x to 3x SDE, depending on factors like revenue growth rate, customer retention, and reliance on third-party platforms (e.g., Amazon FBA stores typically trade at lower multiples than standalone Shopify stores with owned customer data).
Should I use EBITDA or SDE for my mid-sized business?
Use EBITDA for mid-sized businesses with professional management, where owner compensation is separate from operational expenses. Use SDE if the owner is actively involved in day-to-day operations and their compensation is tied to business performance.
Why is my asset-based valuation lower than my earnings-based valuation?
Asset-based valuations only account for tangible and recorded intangible assets, not the business's ability to generate future earnings. This is common for service businesses or companies with strong brand value but few physical assets.
Additional Guidance
Always use 3-5 years of average earnings figures rather than a single year's data to smooth out anomalies like pandemic-related revenue drops or one-time windfalls.
Adjust your valuation for non-operating assets (e.g., excess cash, unused real estate) by adding their fair market value to the calculated total for earnings-based methods.
For businesses with seasonal revenue, use annualized earnings figures that account for full-year seasonality rather than trailing 12-month data that may capture only peak or off-peak periods.
Compare your valuation to recent sales of similar businesses in your region and industry to validate your estimate, as multiples can vary by geography and local market conditions.