Business
Business Valuation Calculator
Estimates a business value from earnings and a multiple, which is a starting point rather than a valuation.
Result
This is a rough market-rules-of-thumb estimate, not a valuation. Real multiples depend heavily on recurring revenue, customer concentration, whether the business runs without the owner, and the state of your books. Get a professional valuation before any transaction.
Get a Free Business AuditHow the calculation works
A normalised earnings figure multiplied by a market multiple, with any debt deducted and surplus assets added. For a small business the earnings figure is commonly seller's discretionary earnings, meaning profit before the owner's compensation and discretionary items; for larger businesses it is typically an earnings measure before interest, tax and depreciation.
What moves the number
- Which earnings measure is used and how it is normalised.
- The multiple, which reflects risk and transferability.
- Owner dependence and customer concentration.
- Debt and surplus or deficient working capital.
Where this one goes wrong
The multiple is where the value actually lives and it reflects how transferable the business is: a business dependent on the owner's relationships, or with revenue concentrated in a few customers, attracts a materially lower multiple than the same earnings in a business that runs without its founder. This is an arithmetic estimate rather than a valuation, and a transaction or a dispute needs a professional valuation from someone who can examine the records.
Before you quote
- Normalise earnings properly before applying any multiple.
- Consider owner dependence and customer concentration honestly.
- Get a professional valuation for any actual transaction.
Questions
About this calculator
What determines the multiple?
Risk and transferability more than anything else. A business dependent on the owner's personal relationships, or with revenue concentrated in a few customers, attracts a materially lower multiple than the same earnings in a business that runs without its founder.
What is seller's discretionary earnings?
Profit before the owner's compensation and discretionary items, which is the common basis for small business valuation because a buyer will replace the owner's role on their own terms. Normalising it properly is where most of the work is.
Is this a valuation?
No, it is an arithmetic estimate from figures you supply. A transaction, a dispute, a tax matter or a financing application needs a professional valuation from someone who can examine the records and the market properly.
The formula
value = seller's discretionary earnings × multiple
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How to use this calculator
- Annual revenue ($). Enter your own figure; the page starts at $1,200,000.
- Net profit ($). Enter your own figure; the page starts at $145,000.
- Owner's salary and benefits ($). Enter your own figure; the page starts at $90,000.
- One-off and personal add-backs ($). Non-recurring costs a new owner would not carry.
- Earnings multiple. Small trade businesses commonly trade around 2–4× SDE.
- Debt to be repaid ($). Enter your own figure; the page starts at $60,000.
The result updates as you type, so you can try a figure, see what it does to estimated enterprise value, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Annual revenue | $1,200,000 |
| Net profit | $145,000 |
| Owner's salary and benefits | $90,000 |
| One-off and personal add-backs | $15,000 |
| Earnings multiple | 2.8 |
| Debt to be repaid | $60,000 |
What comes out
| Result | Value |
|---|---|
| Estimated enterprise value main result | $700,000 |
| Value to you after debt | $640,000 |
| Seller's discretionary earnings | $250,000 |
| As a multiple of revenue | 0.6× |
Seller's discretionary earnings of $250,000 at 2.8× suggests an enterprise value around $700,000, or $640,000 to you after debt.
How sensitive the answer is
Holding everything else steady and changing only annual revenue, this is what happens to estimated enterprise value. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Annual revenue ($) | Estimated enterprise value |
|---|---|
| $600,000 | $700,000 |
| $900,000 | $700,000 |
| $1,200,000 example above | $700,000 |
| $1,800,000 | $700,000 |
| $2,400,000 | $700,000 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Annual revenue ($)
- A money amount, starting at $1,200,000.
- Net profit ($)
- A money amount, starting at $145,000.
- Owner's salary and benefits ($)
- A money amount, starting at $90,000.
- One-off and personal add-backs ($)
- Non-recurring costs a new owner would not carry.
- Earnings multiple
- Small trade businesses commonly trade around 2–4× SDE.
- Debt to be repaid ($)
- A money amount, starting at $60,000.
What the results tell you
| Result | What it is |
|---|---|
| Estimated enterprise value | The headline result. A money figure. |
| Value to you after debt | A money figure. |
| Seller's discretionary earnings | A money figure. |
| As a multiple of revenue | A number. |
Where these figures usually mislead
Business calculations assume the inputs are steady. Seasonality, a few large customers, and slow payment all break that assumption. A figure that looks healthy annually can still leave you short in a given month.
Keep going
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