Business Valuation Calculator

What is a business valuation calculator?

A business valuation calculator estimates what a company could sell for. This business valuation calculator uses seller’s discretionary earnings, or SDE, and a low and high multiple. If you are asking, “What is my business worth?”, the estimate gives you a starting point for a sale, purchase, financing conversation, or succession plan.

SDE is an estimate of the earnings available to a working owner. The calculator uses this formula: SDE = net profit + owner compensation + add-backs. It then estimates value by multiplying SDE by the selected multiple. That makes this a practical SDE calculator, but not a formal appraisal or a promise of what a buyer will pay.

Why business valuation matters

A valuation estimate can help you decide whether to prepare your company for sale, consider a purchase offer, or keep building the business. It can also inform discussions with a lender, co-owner, or successor. The result is more useful when you understand which earnings and assumptions drive it.

A buyer may look beyond the calculation. They can assess whether customers will stay, whether revenue depends on you personally, how reliable the records are, and what equipment, inventory, or debt comes with the business. A strong estimate is a planning tool, not a substitute for due diligence or a negotiated deal.

If you are planning a purchase, the SBA’s guide to buying an existing business can help you think through the broader transaction. For tax consequences or a formal valuation, consider asking a qualified tax professional or business valuation professional.

How to use this business valuation calculator

1. Enter yearly revenue and net profit from the business’s records. Use figures for the same period and make sure you understand how profit was calculated.
2. Enter the owner’s salary and benefits. Include compensation paid to the owner that is reflected in the business’s expenses.
3. Enter one-time and personal expenses only when they are included in profit and can reasonably be treated as add-backs. Keep records and be ready to explain each adjustment to a buyer.
4. Choose low and high SDE multiples that fit the assumptions you want to test. The calculator applies each multiple to SDE; your selections are estimates, not a market quote.
5. Review the value range and the SDE calculation. Check that the inputs reflect the business you are considering, then adjust an assumption to see how it changes the estimate.

Business valuation calculator example

How to read your business valuation results

The estimated value range applies your low and high multiples to SDE. The low end and high end are scenarios based on the inputs you chose, not guaranteed prices. A buyer may value the company differently after reviewing its records, assets, obligations, customer relationships, and reliance on the owner.

The SDE figure shows the earnings base used in the calculation. Review every add-back carefully. If an expense will continue after a sale, or if you cannot support an adjustment with records, treating it as an add-back may overstate SDE and the estimated value range. Ask your accountant or valuation professional to review uncertain items.

How to improve your business valuation

1. 01

   Make earnings easier to verify

   Keep business and personal spending separate, reconcile accounts, and save invoices and receipts for claimed add-backs. Clear records help a buyer understand the company’s actual earnings.

2. 02

   Reduce dependence on the owner

   Document key processes, train employees to handle customer and supplier relationships, and make responsibilities clear. A business that can operate without your constant involvement may be easier for a buyer to take over.

3. 03

   Protect repeat business

   Track why customers return and address recurring complaints. Review supplier terms and customer agreements so you know which relationships and commitments could change hands in a sale.

4. 04

   Test the assumptions before acting

   Use the low and high multiples to compare scenarios, then ask a qualified professional to assess whether the assumptions fit your business and transaction plans. For tax treatment of a sale, confirm the details with a tax professional.

Common business valuation mistakes

• Counting unsupported expenses as add-backs

  An expense does not become an add-back just because you would prefer not to pay it. Keep evidence, explain why it will not continue under a new owner, and avoid counting the same adjustment twice.

• Confusing revenue with earnings

  Revenue is the money the business brings in; SDE is the earnings figure used by this calculator. A large revenue number alone does not show how much income is available to an owner.

• Treating the estimate as an offer

  The calculator applies the multiples you enter. A buyer can use different assumptions or negotiate based on records, risks, assets, and deal terms. Treat the result as a planning estimate rather than a confirmed sale price.

• Using inconsistent records

  Revenue, profit, owner compensation, and add-backs need to describe the same business and accounting period. Mixing periods can make the SDE figure misleading.

The business valuation formula

Key terms

Seller’s discretionary earnings (SDE)

The earnings estimate used here: net profit plus owner compensation and eligible add-backs.

Multiple

A factor applied to SDE to estimate a possible business value. The calculator uses the low and high multiples you enter.

Add-back

An expense added back to profit when it is supportable and is not expected to continue for a new owner.

Implied revenue multiple

The estimated value range expressed in relation to yearly revenue. It is shown for context and is not the calculator’s valuation formula.