Get a quick market-multiple estimate of what a business could be worth. Choose seller's discretionary earnings (SDE), EBITDA or revenue as the base, enter a low and high multiple from comparable sales or a broker, and see the low, mid and high valuation, plus equity value after debt and cash.
Choose a method: SDE for owner-operated small businesses, EBITDA for larger companies with management in place, revenue for fast-growing or early-profit firms.
Enter annual revenue and the earnings figure for your method (SDE or EBITDA).
Enter a low and high multiple from comparable sales, industry reports or an advisor.
Optionally add debt and cash to convert enterprise value into equity value.
Read the low, mid and high value and check the implied multiples.
The market multiple formula
Business value = Financial metric × Multiple
SDE method: value = SDE × SDE multiple. SDE = pre-tax profit + one owner's salary and benefits + interest + depreciation and amortization + one-time or discretionary expenses.
EBITDA method: value = EBITDA × EBITDA multiple. EBITDA = earnings before interest, taxes, depreciation and amortization, after paying management a market salary.
Revenue method: value = annual revenue × revenue multiple. Useful when profits are small or volatile, but it ignores profitability.
Equity value = enterprise value − debt + cash.
Example: a business with $300,000 of SDE and comparable sales at 2.5× to 3.5× is worth roughly $750,000 to $1,050,000, with a mid-point of $900,000. On $1,200,000 of revenue that mid-point equals 0.75× revenue.
Choosing the method
Method
Best for
Main weakness
SDE multiple
Owner-operated small businesses (shops, services, franchises)
Depends on correctly identifying owner add-backs
EBITDA multiple
Established companies with a management team
Ignores capital spending and working capital needs
Revenue multiple
High-growth or recurring-revenue firms, early profitability
Treats a low-margin and a high-margin business alike
What pushes a multiple up or down
Higher: steady growth, recurring revenue, diversified customers, documented processes, a team that runs without the owner, clean financial records.
Lower: heavy dependence on the owner or a few customers, declining sales, outdated equipment, legal or regulatory risks, poor bookkeeping.
Frequently asked questions
How does the multiple method value a business?
Value = financial metric × multiple. If similar businesses sold for 2.5 to 3.5 times their SDE and yours has $300,000 of SDE, the estimated range is $750,000 to $1,050,000. The multiple captures what buyers have been willing to pay for that level of earnings or sales.
What is SDE?
Seller's discretionary earnings is pre-tax profit before interest, depreciation and amortization, plus one owner's salary and benefits, and discretionary or one-time expenses. It shows the total financial benefit to a single owner-operator and is the usual metric for small owner-run businesses.
When should I use EBITDA instead of SDE?
EBITDA assumes the business pays a market salary to management, so it suits larger companies where the owner is not the only operator. Buyers of mid-sized companies, private equity firms and lenders typically work with EBITDA multiples.
Where do I find the right multiple?
Use recent sales of comparable businesses (from business brokers, transaction databases or industry associations), published reports for your sector, or an advisor's opinion. Multiples depend on size, growth, industry, customer concentration, owner dependence and the economy, which is why this calculator asks you to enter them.
What is the difference between enterprise value and equity value?
Multiples of EBITDA or SDE usually produce enterprise value, the value of the whole operating business. Equity value, what the owners receive, = enterprise value − debt + cash. Many small business sales are done cash-free and debt-free, where the seller keeps the cash and pays off the debt.
Is this a formal appraisal?
No. It is a quick estimate for planning and negotiation. A formal valuation would also consider discounted cash flow, asset values, working capital, quality of earnings and deal terms.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.