A business owner wanted to sell her marketing agency. She expected $1 million based on $800,000 in annual revenue. Her broker ran the numbers differently: SDE was $165,000, industry multiple 2.5x. Data-supported valuation: $412,500. The gap between perceived value and calculated value kills deals.
Your business is worth what a buyer will pay — and buyers pay based on earnings multiples, not revenue. This calculator implements three methods: SDE multiple (small businesses), EBITDA multiple (mid-sized), and DCF (rigorous financial analysis).
How to Use This Calculator
SDE Multiple — Enter net income, owner salary, depreciation, add-backs, interest. Tool sums into SDE, multiplies by industry multiple. Select industry for typical ranges. Results include SDE breakdown, value range, sensitivity table.
EBITDA Multiple — Enter revenue, EBITDA, multiple. Subtract debt, add cash for equity value. Valuation bridge shows each step.
DCF — Enter year 1 cash flow, growth rate, discount rate, terminal growth. Projects 5 years, discounts to present value, adds terminal value. Sensitivity table across discount rates.
The Three Formulas
SDE: Value = SDE × Multiple. SDE = Net Income + Owner Salary + D&A + Add-backs + Interest.
EBITDA: Equity Value = (EBITDA × Multiple) − Debt + Cash.
DCF: Value = Σ(FCF ÷ (1+r)^n) + Terminal Value ÷ (1+r)^5.
FAQ
Q: Which method?
A: Under $5M revenue → SDE. Mid-sized → EBITDA. Growth companies → DCF. Run all three for a range.
Q: What multiple?
A: Service 2.0-3.5x, retail 1.5-3.0x, tech 3.0-6.0x. Consult a broker for precision.
Q: What are add-backs?
A: Personal expenses through the business a new owner wouldn’t incur (vehicle, phone, family salaries).
Q: Why is terminal value so large?
A: It captures all cash flows beyond year 5. Typically 50-70% of DCF value for growth businesses.
Know What Your Business Is Worth
EBITDA Calculator — Calculate the earnings that service your debt.
Cash Flow Forecast Tool — Verify your cash flow supports current and planned debt payments.