Business Valuation Calculator
Get a quick estimate of your business value using two common methods: revenue multiple and discounted cash flow (DCF). Compare both approaches to get a valuation range that can guide buying, selling, or investment decisions.
Business valuation is more art than science. Despite formulas appearing precise, real-world business values reflect negotiations, market conditions, buyer-specific factors, and intangibles (relationships, brand equity, intellectual property) that no formula fully captures. The same business can be worth different amounts to different buyers — a strategic buyer leveraging synergies may pay 2-3x what a pure financial buyer would. This makes valuation a starting point for negotiation, not a definitive answer.
Three main valuation approaches dominate small-to-mid business transactions: (1) **Earnings multiples** — multiply earnings (SDE for small businesses, EBITDA for larger) by industry-specific multiples (typically 2-4x SDE for businesses under $1M earnings, 3-6x EBITDA for $1M-$10M, 6-10x+ for $10M+). (2) **Revenue multiples** — used especially for high-growth SaaS or services without clear earnings (typically 1-5x revenue for traditional businesses, 3-15x for SaaS). (3) **Discounted Cash Flow (DCF)** — projects future cash flows and discounts back to present value at required rate of return. Used heavily for larger transactions and stable businesses with predictable cash flows.
This calculator estimates business value using all three methods, giving a triangulated range rather than a single number. Use it for: preliminary valuation analysis before formal appraisal, gut-checking offers received or made, understanding which valuation method favors your situation, and learning the framework for business valuation conversations. Important caveats: this calculator provides estimates only. Real transactions involve formal appraisal (cost $5K-$25K), legal due diligence, financial review by accountants, and negotiation. Don't use this as basis for actual transactions exceeding $100K. Valuations also have huge industry/situation variance — a 4x SDE multiple is normal for some businesses but absurd for others. Always benchmark against actual recent sales (BizBuySell data, broker comparables) for your specific industry and size.
Inputs
Seller's discretionary earnings
Industry-specific (typically 1-5x)
SDE multiple (typically 2-4x)
Required rate of return
Results
Revenue Multiple
$1,250,000
Earnings Multiple
$450,000
DCF Value
$1,688,575
Average Estimate
$1,129,525
Valuation Methods Comparison
Projected Revenue & Profit
Projected Cash Flows
| Year | Revenue | Profit | Discounted CF |
|---|---|---|---|
| 1 | $550,000.00 | $165,000.00 | $143,478.26 |
| 2 | $605,000.00 | $181,500.00 | $137,240.08 |
| 3 | $665,500.00 | $199,650.00 | $131,273.12 |
| 4 | $732,050.00 | $219,615.00 | $125,565.59 |
| 5 | $805,255.00 | $241,576.50 | $120,106.22 |
Formula
How to use this calculator
- Enter annual revenue (most recent year, or trailing 12 months).
- Enter annual SDE (Seller's Discretionary Earnings) — pre-tax profit + owner's salary + personal expenses + one-time costs + depreciation. For larger businesses, use EBITDA instead.
- Enter revenue multiple for your industry (research recent comparable sales — BizBuySell, broker reports).
- Enter SDE/EBITDA multiple for your industry and business quality.
- Enter expected annual growth rate (conservative — buyers discount aggressive projections).
- Enter discount rate for DCF (15-25% typical for small business risk; lower for stable larger companies).
- Enter projection period (5 years standard; 3-7 acceptable depending on visibility).
- Review the three valuation estimates as a range.
- For actual transactions: hire formal business appraiser (USPAP-certified, $5K-$25K) for defensible valuation.
- For preliminary planning: average the three methods, then adjust ±20% based on business-specific factors (concentration, growth, owner-dependence, etc.).
- Use BizBuySell, Axial, or business broker data to find comparable recent sales in your industry and size.
- Be conservative on multiples — overoptimistic valuations sour deals. Better to under-promise and have buyer increase offer than overshoot and watch deals collapse.
Worked examples
Small service business — typical valuation
Landscaping company: $600K revenue, $180K SDE, 12% growth, owner-operated. Industry multiples: 1.0-1.5x revenue, 2.5-3.5x SDE. Revenue method: $600K × 1.2 = $720K SDE method: $180K × 3 = $540K DCF method: ~$700K (assuming 10% growth, 18% discount) Estimated value range: $540K - $720K. Mid-point ~$630K. Adjustments: + Recurring contract base (40% of customers): +$50K + Established 10+ years: +$30K - Owner does ~30% of work personally: -$100K Adjusted estimate: $520K - $700K. Most likely sale: $600K-$650K. This is typical small service business range. Most actual transactions land here for similar businesses.
SaaS startup — revenue multiple dominates
B2B SaaS: $2M ARR, $200K SDE (heavy reinvestment for growth), 40% YoY growth, 5% churn. For SaaS, revenue multiples and ARR-based multiples dominate over earnings. Revenue multiple (4x for mid-growth SaaS): $2M × 4 = $8M Earnings multiple (5x SDE since investor view differs): $200K × 5 = $1M Rule-of-thumb SaaS: ARR × (some function of growth+retention) For SaaS, the dominant valuation method is ARR × multiple based on: - Growth rate (40% is solid for $2M ARR stage) - Retention/churn (5% monthly churn is concerning; 5% annual is good — clarify) - Gross margin (>70% expected) - LTV/CAC efficiency This SaaS likely valued $6M-$10M depending on metrics quality. Strategic acquirers may pay 6-10x ARR for compelling fit. Financial buyers typically 4-6x ARR. The $200K SDE is essentially irrelevant — SaaS is valued on growth and recurring revenue, not current profitability.
Established manufacturing business
Manufacturer: $5M revenue, $750K EBITDA, 5% growth, 25 employees, professional management. For larger businesses, EBITDA multiples dominate. EBITDA multiple (5x for solid mid-market manufacturing): $750K × 5 = $3.75M Revenue multiple (0.75x): $3.75M (coincidentally same) DCF (12% discount, 5-yr): ~$4M Estimated value: $3.75M - $4M. Adjustments: + Owner has good management team (not required for operations): +$300K + Diverse customer base: +$200K + 20-year track record: +$100K - Single facility, lease ending in 3 years: -$200K Adjusted estimate: $4M - $4.5M. Likely sale around $4.2M ($560K × 7.5x). For mid-market businesses, formal valuation by qualified appraiser is essential ($10K-$25K cost). Buyers will do extensive due diligence (financial review, customer concentration analysis, market position assessment).
When to use this calculator
Use this calculator for preliminary business valuation analysis, when considering buying or selling a business, when raising capital and needing valuation context, or when learning the framework for business valuation discussions.
Pair with profit-margin (profitability assessment), cash-flow (financial health), and break-even (operating leverage).
Important business valuation considerations:
1. **No single "correct" valuation.** Multiple methods produce different results. Real transactions involve negotiation between methods. Triangulate using 3+ approaches.
2. **Industry context dominates.** A 3x SDE multiple is excellent for some industries (HVAC), absurd for others (struggling print shops). Research industry-specific multiples for your situation.
3. **Buyer type matters enormously.** Strategic buyers (competitors, suppliers, customers) often pay 1.5-3x what financial buyers do due to synergies. Sale process should target appropriate buyer type.
4. **SDE vs. EBITDA distinction.** SDE = pre-tax profit + owner salary + personal expenses + one-time + non-cash (depreciation). For owner-operated small business. EBITDA = Earnings Before Interest, Taxes, Depreciation, Amortization. For larger businesses with professional management. Different multiples apply.
5. **Customer concentration is a major discount.** Single customer >25% of revenue typically -25-50% to multiple. Buyers terrified of losing concentrated customers post-acquisition.
6. **Owner dependence reduces value.** If business cannot operate without specific owner (relationships, skills, personality), buyers discount heavily. Document processes and develop management team before sale.
7. **Recurring revenue increases value substantially.** Subscription, contract, retainer-based revenue valued 1.5-3x higher than transactional revenue. Same dollars, different multiplier.
8. **Clean financials matter.** Well-organized books, 3+ years of professionally prepared financial statements, clean separation of personal/business expenses can add 0.3-1x to multiple.
9. **Growth trajectory affects multiple.** Growing 20%+/year justifies premium multiples. Flat businesses get base multiples. Declining businesses get discounted multiples.
10. **Comparable sales are gold standard.** BizBuySell publishes actual transaction data. Business brokers maintain comparable databases. Use these instead of theoretical multiples for benchmarking.
11. **DCF is academic for most small businesses.** Theoretically rigorous but rarely how small businesses transact. SDE/EBITDA multiples dominate. Use DCF for understanding theoretical value floor.
12. **Asking price ≠ selling price.** Most small businesses sell for 15-30% below asking price after negotiation, due diligence findings, and financing reality. Set asking price 10-20% above target.
13. **Don't trust formula-only valuations.** Engage business broker or appraiser for material transactions. Cost ($5K-$25K) is small relative to deal value.
14. **Tax implications matter.** Same gross sale price can produce very different after-tax results based on deal structure (stock vs. asset sale, allocation of purchase price). Plan with tax accountant.
Common mistakes to avoid
- Using one valuation method exclusively. Triangulate using 2-3 approaches for credible range.
- Ignoring industry-specific multiples. A 3x multiple is great for one industry, absurd for another.
- Forgetting customer concentration discount. Single customer >25% typically -25-50% from multiple.
- Confusing SDE with EBITDA. SDE for small owner-operated; EBITDA for larger professionally managed.
- Trusting DCF over comparables. Actual transaction data (BizBuySell, brokers) more reliable than theoretical DCF.
- Setting asking price too high. Most businesses sell 15-30% below asking; high anchor often loses serious buyers.
Frequently Asked Questions
Sources & further reading
- Small Business Valuation Resources — U.S. Small Business Administration
- Business Sales Data and Analysis — BizBuySell
- Business Appraisal Standards — The Appraisal Foundation (USPAP)