Small Business Valuation Calculator

How to Use the Valuation Tool

SDE Multiples — How Small Businesses Are Actually Priced

10 Facts About SMB Valuation

Frequently Asked Questions

• What's SDE?+
  Seller's Discretionary Earnings = Net Income + Owner's Salary + Owner's Benefits + Interest + Depreciation + Amortization + Non-recurring expenses. Captures all the cash a single-owner business generates for the owner. The standard valuation metric for SMBs under USD 1M earnings. Above that, switch to EBITDA which doesn't add back owner compensation.
• What's a "good" multiple?+
  Industry-dependent. Service: 2-3×. Restaurant: 1.5-2.5×. E-commerce: 3-4×. SaaS: 5-8×. Manufacturing: 2.5-4×. Healthcare: 3-5×. Within an industry, multiples vary by growth, owner dependence, concentration. The tool's "mid" multiple uses your inputs to land within the industry range.
• How do I improve my multiple?+
  Top moves: (1) reduce owner dependence — hire a manager, document SOPs, systematize customer relationships. Worth 0.3-0.8× extra. (2) Diversify customers — no client should exceed 15% of revenue. Worth 0.2-0.5×. (3) Grow profitably — 15%+ recurring growth adds 0.4-0.8×. (4) Convert to recurring revenue model where possible — premium multiples. (5) Clean up books — buyers heavily discount messy financials. 6-12 months of focused work can add 30-50% to sale price.
• How long does it take to sell a business?+
  Typical SMB sale: 6-12 months from listing to close. Pre-listing prep (clean financials, prepare CIM): 1-3 months. Marketing + buyer screening: 2-4 months. Letter of intent + due diligence: 1-3 months. Closing: 30-60 days. Plan for 12-18 months total from "decide to sell" to "cash in hand". Smaller businesses (under USD 500K SDE) often take longer due to fewer buyers.
• Do I need a business broker?+
  For businesses USD 200K+ SDE: yes, typically worth the 10-15% commission. Brokers provide marketing reach (proprietary buyer lists), confidentiality, negotiation, deal-structuring expertise. For smaller businesses (under USD 200K SDE): often more cost-effective to list on BizBuySell yourself + negotiate directly. For larger businesses (USD 5M+): consider M&A advisor instead of business broker — different skill set, lower percentage fee on larger absolute deal.
• What's a Quality of Earnings (QoE) review?+
  Independent CPA review of seller's reported earnings + add-backs. Standard for buyer due diligence on businesses USD 500K+ SDE. Verifies that add-backs are legitimate (truly one-time or owner-discretionary) and identifies any "reversed" working capital changes that overstate earnings. QoE typically costs USD 15-50K and is buyer-funded. Sellers can do a "sell-side QoE" preemptively to identify and fix issues before buyer review — material to deal certainty.
• Asset sale vs stock sale — which?+
  For US SMB sales, asset sales dominate (80%+ of transactions). Buyer gets stepped-up basis for depreciation; seller faces double taxation (corporate gain + dividend if C-corp; flow-through if S-corp or LLC). Stock sales preferred by sellers for cleaner tax treatment but harder to negotiate — buyer assumes all known + unknown liabilities. C-corp sellers often forced to asset sale by buyer demand; pass-through entities have more flexibility.
• Should I expect seller financing?+
  Common. SBA 7(a) buyers often require 10-20% seller note as part of the deal structure. Cash-only deals exist but typically price 15-25% below seller-financed equivalent. Seller financing terms: typically 5-10 year amortization, 5-8% interest, second-position to SBA. Many sellers accept partial seller financing to maximize price + provide buyer with skin-in-the-game alignment. Get a personal guarantee from buyer on any seller note.
• What's an earnout?+
  A contingent portion of the purchase price tied to future performance (typically next 1-3 years of revenue or EBITDA). Used when buyer + seller disagree on price — seller bets on future, buyer pays only if it materializes. Common 10-30% of total deal value in earnouts. Bias: earnouts favor buyer (control of business affects payout) — sellers prefer to take cash even at a discount. Most negotiated when projections look aggressive but seller believes them strongly.
• Will my business sell at all?+
  Statistics show only ~20% of listed SMBs successfully close. Reasons for failure: priced too high (most common), owner-dependent (no transferable systems), high customer concentration, poor financial records, geographic + industry mismatches with buyer pool. Improving saleability factors before listing (clean books, documented SOPs, manager-led, diversified customers, recurring revenue %) dramatically improves close probability. Pre-list with a broker who can assess saleability honestly.

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