SMB Tools / Business valuation
What is this business worth?
Estimate the value of a small business the way buyers and brokers do: a multiple of its Seller's Discretionary Earnings. Tune the assumptions, see the realistic range, and take the numbers with you.
Your earnings
Start with the cash the business actually puts in an owner’s pocket. We add these up into SDE.
Annual net profit (pre-tax)
$
Owner's salary & compensation
$
Other add-backs
$
Seller’s Discretionary Earnings (SDE)$210,000
The multiple
Industry
SDE multiple
2.5x
Typical for service business (general): 2x to 3x SDE. Recurring revenue and clean books push higher; heavy owner dependence and customer concentration push lower.
Estimated value
$525,000
at 2.5x SDE · typical range $420,000 to $630,000
- SDE
- $210,000
- Typical value range
- $420,000 to $630,000
- If an offer came in 15% under
- $446,250
- If diligence finds earnings 20% lower
- $420,000
A first-pass estimate for planning, not a formal valuation or an offer. For a deal, get a professional valuation and a CPA review of the numbers.