What is SDE in business valuation?

SDE stands for Seller's Discretionary Earnings. It equals Net Income + Owner's Salary + Non-cash expenses like depreciation + one-time costs. SDE is the most common method buyers and brokers use for small businesses under $5 million in value.

Business Valuation Calculator – Find What Your Business Is Worth (Free)

Business Valuation Calculator

Find out what your business is worth in minutes. Use four valuation methods trusted by buyers, investors, and brokers worldwide.

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Annual Net Profit ($) Your business profit after all expenses.

Industry Multiplier Multiplier varies by industry. Pick closest match.

Projected Annual Cash Flow ($) Expected cash flow next year.

Annual Growth Rate (%) Expected yearly growth of cash flow.

Discount Rate (%) Risk-adjusted rate. Most use 10%–20%.

Projection Period (years) How many years to project out.

What is SDE? Seller’s Discretionary Earnings = Net Profit + Owner Salary + Depreciation + One-time expenses. Buyers use SDE to value small businesses under $5M.

Net Income ($)

Owner’s Salary / Draw ($)

Depreciation + Amortization ($)

One-time / Personal Expenses ($)

SDE Multiple Most small businesses sell at 2x–3.5x SDE.

Tangible Assets ($) Equipment, property, inventory, cash.

Intangible Assets ($) Brand value, patents, customer lists.

Total Liabilities ($) All business debts and obligations.

Your Valuation Results

This is an estimate for planning purposes only. For legal, tax, or investment decisions, work with a certified business appraiser (CBA).

What Is a Business Valuation Calculator?

A business valuation calculator helps you estimate what your company is worth right now. It uses your financial data — revenue, profit, cash flow, and assets — to produce a number buyers or investors can work with.

You need a valuation when you plan to sell your business, raise funds, bring on a partner, apply for a business loan, or sort out taxes and legal matters. Without a number, you negotiate blind.

Our calculator uses four methods so you get a full picture, not just one angle. Compare all four results to find a realistic range for your business.

The 4 Business Valuation Methods We Use

1. Profit Multiplier

Value = Profit × Industry Multiple

Best for businesses with steady profits. The multiple depends on your industry and risk level.

2. DCF (Discounted Cash Flow)

Value = Future Cash Flow ÷ Discount Rate

Best for growing businesses. It shows the present value of money you expect to earn in the future.

3. SDE Multiple

SDE = Net Income + Owner Pay + Addbacks

The most common method for small businesses under $5M. Buyers focus on SDE, not just net profit.

4. Asset-Based

Value = Total Assets – Total Liabilities

Best for asset-heavy businesses like manufacturing, real estate, or retail with large inventory.

Not sure which method fits your business? The U.S. Small Business Administration recommends combining multiple methods for the most accurate estimate.

Industry Valuation Multiples (2025 Reference)

Use this table to pick the right multiplier for your business type. These figures come from real transaction data.

Industry	SDE Multiple Range	EBITDA Multiple Range	Valuation Method
SaaS / Software	4x – 8x	8x – 15x	Revenue or ARR multiple
E-commerce	2x – 4x	4x – 7x	SDE or EBITDA
Retail Store	1.5x – 3x	3x – 5x	SDE
Restaurant / Food	1x – 2.5x	3x – 5x	SDE
Service Business	1.5x – 3.5x	4x – 6x	SDE or Revenue
Manufacturing	2x – 4x	4x – 7x	EBITDA + Assets
Healthcare / Medical	3x – 5x	6x – 10x	EBITDA
Professional Services	1.5x – 2.5x	3x – 5x	Revenue or SDE

Source: Pepperdine Private Capital Markets Report and industry transaction databases. Multiples vary based on revenue size, growth, and risk.

Why Business Valuation Matters

Knowing your business value does more than help you set a sale price. Here is when you actually need this number:

Selling your business: Set a price that attracts buyers and protects your interests.
Raising investment: Investors need a valuation before they write a check. Learn more about business finance strategies on Busnese.
Getting a loan: Banks and lenders often require a valuation for large loans. Try our Business Loan Calculator to estimate repayments.
Buy-sell agreements: A co-owner dispute or exit needs a clear, fair number.
Estate and tax planning: The IRS requires a formal valuation for estate transfers.
Strategic planning: Track your business worth year over year to measure real growth.

How to Increase Your Business Value Before Selling

Buyers pay more for businesses that run without the owner. Here are the five things that move your valuation number up fast:

1. Grow Recurring Revenue

Subscription income or retainer clients boost your multiple. A business with 80% recurring revenue gets a much higher offer than one that starts from zero every month.

2. Reduce Owner Dependence

Buyers discount businesses where the owner does everything. Hire a manager, document your processes, and show the business runs without you.

3. Diversify Your Customers

If one client brings more than 20% of your revenue, buyers see risk. Spread your customer base to lower your discount rate and raise your multiple.

4. Clean Up Your Financials

Get your books current. Separate personal and business expenses. Three years of clean, audited financials can raise your valuation by 20% or more.

5. Document Your Systems

SOPs (Standard Operating Procedures) show a buyer the business has real infrastructure. Read our guide on growing and scaling a business for practical steps.

More Free Business Tools

You may also find these tools useful on Busnese.com:

Business Loan Calculator – Calculate monthly payments and total loan cost
Gross Profit Margin Calculator – Find your profit margin percentage instantly
Markup Calculator – Set the right price for your products
QuickBooks Tool – Streamline your accounting workflow

Frequently Asked Questions

How do I calculate my business value?

Use the four methods above: Profit Multiplier, DCF, SDE, and Asset-Based. Run all four and compare. Most buyers and brokers use SDE for small businesses under $5M and EBITDA for larger ones.

What is a good business valuation multiple?

Most small businesses sell for 2x to 4x SDE. SaaS companies can reach 5x to 10x revenue. Service businesses often get 1.5x to 3x SDE.

What is SDE and why do buyers use it?

SDE stands for Seller’s Discretionary Earnings. It adds back the owner’s salary, personal expenses, and non-cash costs to net income. Buyers use SDE because it shows the real cash benefit a new owner will get from the business not just the accounting profit.

Is a business valuation calculator accurate?

Our calculator gives a solid estimate for planning and negotiation. It will not replace a formal appraisal. For legal purposes, estate planning, or high-value deals, work with a Certified Business Appraiser (CBA) or a licensed CPA with valuation experience.

What is EBITDA and when should I use it?

EBITDA means Earnings Before Interest, Taxes, Depreciation, and Amortization. Use EBITDA for businesses valued above $5 million. Private equity buyers and larger acquirers almost always base offers on an EBITDA multiple. Below $5M, SDE is more common because it factors in the owner’s pay.

How much does a professional business valuation cost?

A certified business valuation from a CPA or licensed appraiser costs between $3,000 and $15,000 depending on business size and complexity. A broker’s informal opinion of value costs less or nothing. Our free calculator gives you a reliable starting point before you spend money on a formal appraisal.

Ready to Know What Your Business Is Worth?

Run the calculator above and get your estimate right now. Once you know your number, you can plan your next move with confidence.

For your next step in financial planning, read our guide on business finance strategies or use our business loan calculator to see your funding options.

Disclaimer: This calculator provides estimates for informational purposes only. It does not constitute financial, legal, or tax advice. Always consult a qualified professional before making business decisions based on a valuation.