Business Valuation Calculator (SDE Method)

What Is SDE (Seller's Discretionary Earnings)?

SDE is the total annual financial benefit one working owner receives from a business: net profit plus the owner's salary, personal benefits run through the company, and true one-time expenses. Small owner-operated businesses are usually priced as a multiple of SDE because it shows what the business would actually pay a new owner-operator each year.

How Do You Calculate What a Business Is Worth?

Add net profit, owner salary, owner benefits, and one-time expenses together to get SDE. Then multiply SDE by a market multiple based on recent sales of similar businesses, and express the result as a range. This calculator applies your chosen multiple plus or minus 0.25x to produce a low and a high estimate.

Worked example with the math shown

Example figures for illustration only. Suppose your tax return shows $120,000 in net profit, you pay yourself an $80,000 salary, the business covers $12,000 in owner benefits, and last year included $8,000 in one-time expenses. SDE = $120,000 + $80,000 + $12,000 + $8,000 = $220,000. At a 2.50x industry multiple, the calculator applies a 2.25x to 2.75x band: $220,000 × 2.25 = $495,000 on the low end and $220,000 × 2.75 = $605,000 on the high end, with a midpoint of $220,000 × 2.50 = $550,000. The 2.50x here is only a placeholder: your industry's real multiples may sit well above or below it.

What Drives a Business Valuation Multiple?

Multiples move with risk and transferability. Larger and steadier earnings, a growing revenue trend, recurring or contracted income, a diversified customer base, clean documented financials, a trained team, and a business that runs without the owner all support stronger multiples. Heavy owner dependence, customer concentration, and declining sales pull multiples down.

Because multiples vary widely by industry and deal size, resist borrowing a number from a different trade. Business brokers and business-for-sale marketplaces publish transaction data for closed deals; a broker or a CPA who handles sales in your industry can tell you where businesses like yours have actually traded, which matters far more than any rule of thumb.

When Should You Value Your Business?

Value your business before you plan to sell, buy out a partner, bring in an investor, update an estate plan, negotiate a divorce settlement, or set a buy-sell agreement with co-owners. Many owners also run a yearly estimate simply to track whether the business is building transferable value or just paying a salary.

Forwardfy Capital works with owner-operated businesses every day (here's more about who we are), and this tool lives alongside our other free business calculators so you can plan with real numbers. One more time, because it matters: this page is educational. Do not price a sale, a buyout, or a legal settlement on a web calculator. Hire a professional appraiser, broker, or CPA for any decision with money on the line.

If the estimate above is smaller than you hoped, the levers are the same ones that drive multiples: steadier revenue, better books, and a business that runs without you. A term loan can pay for equipment or capacity that grows earnings, while a business line of credit smooths the cash swings that make financials look risky to a buyer. If cash timing is the real issue, start with the working capital guide.

Whatever you borrow, know the payment before you sign: model it with the business funding calculator, then compare merchant cash advances, term loans, and lines of credit side by side. The rest of your planning numbers live in our free business calculators.