Business Valuation Calculator

Understanding Business Valuation

Every business valuation starts with a fundamental question: how do buyers measure what a business is worth? The answer depends on the size, type, and profitability of the business. Most small businesses under $5 million in value are priced using an SDE (Seller's Discretionary Earnings) multiple. SDE represents the total financial benefit to a working owner: net profit plus the owner's salary, benefits, and personal expenses run through the business. Larger businesses with professional management typically use EBITDA multiples, which measure operational profitability independent of the owner. This calculator shows both methods, plus revenue multiples and asset-based valuation, so you can see your value from every angle.

What Affects Your Multiple

Two businesses in the same industry with identical profits can have very different valuations. The difference comes down to risk and growth. A business where one customer accounts for 50% of revenue is riskier than one with a diversified base. A business that depends entirely on the owner is worth less than one with trained managers who can run operations. Revenue growth matters too: a company growing 20% per year commands a premium over one that has been flat for three years. Recurring revenue from contracts or subscriptions adds predictability that buyers pay more for. These factors adjust your multiple up or down from the industry baseline. Use our DSCR calculator to evaluate whether a target business generates enough cash flow to service acquisition debt.

Financing a Business Acquisition

If you are buying a business, you will likely need financing to cover most of the purchase price. The most common structure combines an SBA 7(a) loan (up to $5 million with 10-year terms), seller financing (where the seller carries 10% to 30% of the price as a note), and a buyer down payment of 10% to 20%. For larger acquisitions, conventional term loans or investment banking solutions may be appropriate. If the goal is employee ownership, ESOP financing provides a tax-advantaged structure. Use our SBA loan calculator to estimate monthly payments on acquisition financing.

When to Get a Professional Valuation

This calculator provides estimates based on industry benchmarks and your inputs. For major transactions, a formal valuation from a Certified Business Appraiser (CBA) or Accredited Senior Appraiser (ASA) is recommended. You should get a professional valuation when selling to outside buyers, bringing in investors, setting up an ESOP, handling divorce or estate planning, or resolving legal disputes. A formal valuation typically costs $3,000 to $10,000 depending on business size and complexity, but it provides defensible numbers that hold up in negotiations and legal proceedings. Talk to a funding specialist about acquisition financing options, with no impact to your credit score.