Whether you are preparing to sell your company, raising money, buying a competitor, or simply want to know what years of hard work are worth, the single hardest question is: what is this business actually worth? The Smekys business valuation calculator answers it by blending three approaches that professional buyers and brokers actually use — the SDE multiple, the EBITDA multiple, and a discounted cash flow (DCF) model — then averaging them into a single fair market value with a low and high range.
Small businesses do not trade on a stock exchange, so there is no live price ticker. Buyers instead look at the cash a company throws off, compare it to recent deals of similar size, and discount future profits back to today. This calculator codifies that process into six inputs so you can run your own numbers in seconds and stress-test them by changing the discount rate or growth assumption.
How to Use
- Enter your Seller's Discretionary Earnings (SDE). Start from your net profit and add back your owner's salary, personal perks run through the business, depreciation, interest, taxes, and any one-time expenses. SDE represents the cash a new owner could extract in a normal year.
- Enter your EBITDA. This is earnings before interest, taxes, depreciation, and amortization. For larger or more institutional deals it is the standard profit base, and it is usually higher than SDE once you strip out a market-rate owner salary.
- Set Net Debt. If the company carries loans, equipment finance, or a landlord note, subtract the cash you would leave behind from that debt total. This number converts enterprise value into what the owner walks away with.
- Adjust the DCF Discount Rate. The default 15% reflects the return a buyer expects for owning a private small business with no liquidity. Riskier businesses use 20–25%; boring cash-flow businesses can trade at 10–12%.
- Set the Annual Cash Flow Growth you realistically expect over the next few years. Five percent is a safe planning default; fast-growing startups may enter 15–25%.
- Pick the DCF Horizon — 3, 5, 7, or 10 years. Five years is the industry standard because forecasts beyond that are mostly guesswork.
The result card shows three independent value estimates side by side, blends them into an estimated fair market value, and applies a ±15% negotiation band so you know where a serious offer is reasonable.
The Three Valuation Methods Explained
SDE multiple (2.5x). Main-street businesses — restaurants, agencies, shops, contractors — are priced on seller's discretionary earnings, because the buyer is really buying a job plus a profit stream. The International Business Brokers Association and BizBuySell market data put typical multiples between 2.0x and 3.0x SDE for businesses under about $1 million of profit. This calculator uses 2.5x as the midpoint. A business with $200,000 of SDE therefore prices around $500,000.
EBITDA multiple (4x). Once a company is large enough to run without the founder, buyers switch to EBITDA and pay a multiple of it. Lower-middle-market companies usually trade at 3x to 6x EBITDA; 4x is a defensible midpoint for a stable, founder-independent operation. A business with $300,000 of EBITDA prices around $1,200,000 on this method alone.
Discounted cash flow (DCF, 15% discount). The DCF asks what a stream of future cash is worth today. Each projected year's cash is divided by (1 + rate) raised to that year's number, which is why distant profits count for less. With 5% growth, a 15% discount, and a 5-year horizon, each dollar of current SDE is worth about $3.84 today. The result is a value anchored in your own projections rather than in market rules of thumb.
The fair market value is the average of all three methods, which smooths out the quirks of any single approach. The low and high estimates are simply that average minus and plus 15% — the zone where a buyer and seller usually end up negotiating.
Examples
Example 1 — A typical small agency. A marketing agency reports $200,000 SDE, $300,000 EBITDA, no debt, and a steady 5% growth outlook. The SDE method says $500,000, the EBITDA method says $1,200,000, and the DCF says about $767,471. Blended, the fair market value is roughly $822,490, with a negotiation band of $699,117 to $945,864. Because the methods disagree so much, the seller should expect buyers to lean on the conservative SDE number unless they can prove the business runs without them.
Example 2 — A scalable e-commerce company with debt. A DTC brand has $1,000,000 SDE and $1,500,000 EBITDA but carries $500,000 of inventory financing. The three methods produce $2,500,000, $6,000,000, and about $3,837,356. Blended enterprise value is around $4,112,452, and after subtracting net debt the owner equity is roughly $3,612,452. That gap between enterprise value and cash-in-pocket surprises first-time sellers.
Example 3 — Stress-testing the discount rate. Keeping $200,000 SDE and 5% growth, raising the discount rate from 15% to 25% cuts the DCF value from $767,471 to roughly $571,000. Lowering it to 10% pushes it to about $875,000. Since risk tolerance is exactly what buyers negotiate on, run the slider both ways before quoting a price.
FAQ
How do you value a small business?
The standard approach for small businesses is the SDE multiple method: take the owner's discretionary earnings (profit plus owner salary, perks, taxes, interest, and one-time costs) and multiply by 2x–3x. This calculator adds the EBITDA multiple and a DCF, then averages the three to produce a blended fair market value with a ±15% range.
What is a good SDE multiple?
For businesses with under $1 million of SDE, market data from IBBA and BizBuySell shows typical multiples of 2.0x to 3.0x. Stable recurring-revenue businesses with a strong management team hit the top of the range; owner-dependent, volatile, or declining businesses trade below 2x. This calculator uses 2.5x as a neutral midpoint.
Why is EBITDA value higher than SDE value?
EBITDA multiples (usually 3x–6x) are applied to a profit base that already excludes the owner's compensation, so they are used when the business can run without the founder. SDE multiples (2x–3x) are applied to a base that includes the owner's full benefit package, so the business is effectively priced as a job-plus-asset. The two methods rarely agree, which is why averaging them is more robust than trusting one.
What discount rate should I use for a private business?
Small private businesses usually carry a 12% to 25% discount rate because they are illiquid, concentrated, and unproven. The default 15% suits a stable, profitable company; use 20–25% for risky, customer-concentrated, or recently launched businesses, and 10–12% for boring, recurring-revenue enterprises.
Does net debt reduce the sale price?
Yes. The methods above estimate enterprise value — the value of the operating business. What the seller actually receives at closing is enterprise value minus interest-bearing debt, plus excess cash. If your company holds $500,000 of debt against $4.1 million of value, your equity proceeds start around $3.6 million, not $4.1 million.
Can I trust this estimate for an asking price?
Use it as a planning benchmark, not an appraisal. Real offers depend on transferable contracts, customer concentration, lease terms, staff depth, industry tailwinds, and the buyer's own financing. For a formal sale or financing, pair this estimate with a certified business appraisal from a licensed valuation professional.
Disclaimer
This business valuation calculator is provided for informational purposes only and does not constitute financial, tax, accounting, legal, or investment advice. Estimates are based on the inputs you supply and the standard multiple and discounted-cash-flow formulas described above; actual sale prices vary by industry, geography, asset composition, buyer financing, and negotiation. The 2.5x SDE and 4x EBITDA multiples are market midpoints, not guarantees. Always consult a licensed business appraiser, accountant, or attorney before making decisions based on these numbers.