How is a small business valued?

Small businesses are typically valued using earnings multiples (1–4× SDE or EBITDA), revenue multiples (0.3–4× depending on industry), or asset-based methods. The most common method for main-street businesses is Seller's Discretionary Earnings (SDE) × a multiple between 1.5 and 3.5. SaaS and tech companies trade at much higher revenue multiples (3–10×).

What is Seller's Discretionary Earnings (SDE)?

SDE = Net profit + owner's salary + personal expenses run through the business + depreciation + amortization + interest. It represents the true economic benefit to a single owner-operator. Most main-street business buyers use SDE as the earnings base when negotiating price.

What multiple should I use to value my business?

Typical SDE multiples by industry: Retail/restaurant 1.5–2.5×, Service businesses 2–3.5×, Professional services 1.5–3×, Technology/SaaS 3–8× (revenue), Manufacturing 2–4×, E-commerce 2–4×. Higher multiples go to businesses with recurring revenue, strong growth, documented processes, and no key-person dependency.

What reduces a business valuation multiple?

Factors that reduce multiples: key-person dependency (the business relies entirely on the owner), undocumented processes, customer concentration (one customer = 30%+ of revenue), declining revenue, unclean financial records, poor online reviews, and industry-specific risks.

Business Valuation Calculator 2026

Last updated: September 2026 · 2026 IRS & state tax rates

Estimate your business value using revenue multiples and EBITDA/SDE multiples. See valuation range across different methods used by buyers and brokers.

Industry

Annual Revenue

Annual EBITDA / SDE

Net profit + owner salary + add-backs (depreciation, interest, personal expenses)

Business Assets (equipment, inventory)

Annual Revenue Growth

$2,450,000

Estimated Business Value

Range: $1,750,000 – $3,150,000

$4,000,000

Revenue Multiple

$2,450,000

EBITDA Multiple

$450,000

Asset-Based Floor

Revenue$1,000,000

Revenue Multiple (range)3–5×

Revenue-based Valuation$3,000,000–$5,000,000

EBITDA / SDE$350,000

EBITDA Multiple (range)5–9×

EBITDA-based Valuation$1,750,000–$3,150,000

Asset Floor (assets + EBITDA)$450,000

Estimated Midpoint Value$2,450,000

Estimates only. Final value depends on due diligence, deal structure, buyer profile, and market conditions. Use a business broker or M&A advisor for a formal valuation.

Business Valuation Methods Explained

1. Earnings Multiple (Most Common for SMBs)

Value = EBITDA (or SDE) × industry multiple. This is the most commonly used method for businesses under $10M. The multiple is driven by industry, growth, recurring revenue, and risk.

2. Revenue Multiple (Common for SaaS / Tech)

Value = Annual Revenue × multiple. Used for fast-growing tech companies, especially those with negative profit but strong revenue growth. SaaS ARR multiples range from 3× to 10× depending on growth and churn.

3. Asset-Based (Floor Value)

Value = Fair market value of assets − liabilities. Used as a floor — no buyer pays less than the liquidation value of assets. Common for asset-heavy businesses (manufacturing, real estate).

How to Value a Business in 2026

Business valuation determines what a company is worth for sale, investment, estate planning, or partnership buyout. The most appropriate method depends on the business type, size, and purpose of the valuation.

Common Valuation Methods

Method	Formula	Best For
EBITDA Multiple	EBITDA × Industry Multiple	Profitable businesses, M&A
Revenue Multiple	Annual Revenue × Multiple	SaaS, high-growth companies
Seller's Discretionary Earnings	SDE × 2–4×	Small businesses, owner-operated
Asset-Based	Total Assets − Liabilities	Asset-heavy businesses, liquidation

Method

Formula

Best For

EBITDA Multiple

EBITDA × Industry Multiple

Profitable businesses, M&A

Revenue Multiple

Annual Revenue × Multiple

SaaS, high-growth companies

Seller's Discretionary Earnings

SDE × 2–4×

Small businesses, owner-operated

Asset-Based

Total Assets − Liabilities

Asset-heavy businesses, liquidation

Industry EBITDA multiples in 2026: SaaS/software 8–20×, healthcare services 6–12×, manufacturing 4–8×, retail 2–5×, restaurants 2–4×. Small businesses (under $1M EBITDA) generally sell at 3–5× EBITDA; mid-market businesses ($5M+ EBITDA) command 5–10×.