Business Value Calculator
Estimate the value of a business by calculating its EBITDA or Seller's Discretionary Earnings (SDE), applying an industry multiple, and adjusting for cash and debt.
Core Financials
Total sales before any expenses.
Bottom line profit after taxes and all expenses.
EBITDA Adjustments
Add back non-operating expenses to find Earnings Before Interest, Taxes, Depreciation, and Amortization.
SDE Adjustments
For small businesses, owner benefits are added back to find Seller's Discretionary Earnings.
Salary, health insurance, vehicle allowances, etc.
Lawsuits, moving costs, or other non-recurring items.
Valuation Settings
e.g. 2.5x for a typical small business SDE.
Balance Sheet
Cash that will be retained by the new owner.
Debts that the buyer will assume.
EBITDA
$200,000.00
SDE
$300,000.00
Understanding the terms
- EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures a company's operational profitability without accounting for its capital structure or non-cash items. Used mostly for mid-market and larger companies.
- SDE: Seller's Discretionary Earnings. Adds the owner's salary, perks, and one-time expenses back to EBITDA. It represents the total cash flow available to a single owner-operator. Standard for valuing "Main Street" small businesses under $5M in revenue.
- Enterprise Value: The value of the core business operations itself, debt-free and cash-free.
- Equity Value: The final amount the owner gets. It's Enterprise Value plus the cash staying with the business, minus any debts the buyer is taking over.
Frequently asked questions
What is Seller's Discretionary Earnings (SDE)?
SDE is the total financial benefit a single owner-operator derives from a business. It's calculated by taking the net profit and adding back the owner's salary, perks, one-time expenses, and non-cash expenses like depreciation.
Should I use SDE or EBITDA?
If the business is a 'Main Street' business with less than $5 million in revenue and operated by the owner, SDE is the standard. For mid-market companies (over $5 million in revenue) with management teams in place, EBITDA is generally used.
What is a typical multiple for a small business?
Most small businesses valued using SDE sell for a multiple between 2.0x and 3.5x. This varies heavily by industry, recurring revenue, growth trends, and how reliant the business is on the current owner.