Small Business Valuation Calculator
Estimate what a small business is worth two ways: SDE or EBITDA × a multiple range you choose, and capitalised earnings at your required return. Not a formal valuation. Free.
Small Business Valuation Calculator
Two textbook estimates from figures you supply: earnings × a multiple range you choose, and capitalised earnings at a return you require. Seeing them side by side shows whether your multiples and your required return tell the same story.
Not a formal valuation. This is arithmetic on your own assumptions. A valuation for a sale, a loan, tax, an estate or a dispute needs a qualified appraiser who has examined the books.
The multiples are yours to choose from comparable sales in your sector. For scale, BizBuySell's Insight Report for Q2 2026 put the average cash-flow multiple across 2,117 US small-business sales at 2.7. Do not add equipment on top: an earnings-based value already includes the assets that produce the earnings.
Capitalised earnings (cross-check)
How to Use the Valuation Tool
Work out the earnings honestly
For an owner-run business use Seller's Discretionary Earnings: net profit before tax, plus the owner's own salary and benefits, interest, depreciation and amortisation, and genuinely one-off costs. Every add-back has to survive a buyer's accountant, so leave out personal expenses you cannot document. If the business already pays a manager, choose EBITDA instead.
Choose a multiple range from comparable sales
The multiples are the judgement in this method, and they are yours to make. Look for sales of similar businesses in your sector and region; a broker can show you closed deals. The only figure this page quotes is a market-wide average: BizBuySell put it at 2.7 times cash flow for 2,117 US sales in Q2 2026. Your sector, size and risk can put you well away from that.
Set the capitalised-earnings cross-check
Enter the yearly return a buyer would want for the risk, the growth you expect the cash flow to sustain for the long run, and, on an SDE basis, what it would cost to pay someone a market salary to run the business. The calculator capitalises next year's cash flow: with the defaults, $170,000 grows to $175,100 and divided by 22% (25% less 3%) gives $795,909.
Read the two estimates together
If the capitalised figure lands inside your multiple range, your assumptions agree. If it lands well above, either the return you entered is low for a small private business or the multiples are cautious; if well below, the reverse. Change one input at a time and watch which estimate moves. Neither figure is a price: that comes from a buyer, after diligence.
SDE Multiples and Capitalised Earnings — Two Ways to Price a Small Business
SDE vs EBITDA
Seller's Discretionary Earnings describes what a single owner-operator takes out of a business: profit plus the owner's own pay and benefits, interest, depreciation, amortisation and one-off costs. It suits small businesses whose buyer will run them personally. EBITDA (earnings before interest, tax, depreciation and amortisation) is measured after paying for management, so it suits businesses already run by employees and buyers who will not work in them. The same business has a lower EBITDA than SDE, and so a multiple of EBITDA is not comparable with a multiple of SDE. Make sure the multiples you enter were measured on the same basis as your earnings.
Why the market salary matters
Because SDE adds the owner's pay back, it is partly a wage. A buyer who capitalised the whole SDE would be paying, up front, for the salary they will then earn by working in the business. The capitalised-earnings estimate therefore deducts a market salary for running the business before it does anything else. If that salary uses up all the SDE, there is nothing left to capitalise: the buyer would be buying a job, and the calculator says so rather than producing a number.
What moves a business along the range
The same earnings can sell at very different multiples. Buyers pay more for earnings they expect to last: a business that runs without its owner, a customer base not dominated by a few accounts, recurring revenue, documented processes and clean books. They pay less where the owner is the business, where one customer could leave and take a large share of revenue with them, or where the records will not survive diligence. This page does not turn those factors into fixed adjustments, because we found no published source for such numbers; use them to decide whether your business belongs at the low or the high end of the range you entered.
"The average cash flow multiple increased 2% year-over-year to 2.7, while the average revenue multiple remained essentially flat at 0.7." BizBuySell Insight Report, Q2 2026
What the market data says, and what it does not
BizBuySell's Insight Report for Q2 2026 counted 2,117 US businesses changing hands, down 10% on the previous quarter and on a year earlier, at a median sale price of $349,250 and a median cash flow of $155,921. It is built from closed transactions that business brokers report voluntarily, so it describes deals that happened through brokers in the United States. It is an average across all industries; restaurants sold at a median $205,000 and manufacturing businesses at $704,500 in the same quarter. Treat it as a sense of scale, not as the multiple for your business.
BizBuySell's 2.7× average, the SBA's $5 million ceiling, and the salary SDE leaves in
2,117 US businesses changed hands in Q2 2026, down 10% on both the previous quarter and a year earlier (BizBuySell).
The average cash-flow multiple was 2.7, up 2% on a year earlier; the average revenue multiple was 0.7.
The median sale price was $349,250 and the median cash flow $155,921.
Service businesses were 40% of transactions, at a median price of $350,000 and 155 median days on market.
Manufacturing sales took 247 days to close, at a median price of $704,500.
BizBuySell's Q2 2026 report: 90% of buyers expected seller financing in their deal; only 29% of owners planned to offer it.
An SBA 7(a) loan can fund a change of ownership; the maximum loan is $5 million.
SDE includes the owner's pay. Capitalising it whole would make a buyer pay up front for their own future salary.
A capitalisation rate is the required return less long-run growth: 25% − 3% = 22% with this page's defaults.
With the defaults, $170,000 of cash flow capitalises to $795,909, or 3.18 times the $250,000 SDE.
Frequently Asked Questions
- Seller's Discretionary Earnings: net profit before tax, plus the owner's salary and benefits, interest, depreciation, amortisation and genuinely non-recurring costs. It is the cash a single owner-operator gets out of the business in a year, and the usual earnings measure for small owner-run businesses. A business that already pays a manager is usually measured on EBITDA instead, which does not add management pay back.
- One taken from sales of businesses like yours, measured on the same earnings basis. This page does not supply industry multiples: the table it used to carry had no published source. The one figure it quotes is BizBuySell's market-wide average for Q2 2026, 2.7 times cash flow across 2,117 US sales. Your sector, size and the qualities buyers pay for can put you well away from it in either direction.
- Because an earnings-based value already pays for it: the earnings exist because the business has its equipment, so adding the equipment again counts it twice. The tool used to add all tangible assets on top and no longer does. Inventory is different when the deal treats it separately, with the buyer paying for stock on hand at closing, so it has its own optional field. Leave it at zero if your price includes inventory.
- It values the business as a stream of cash flow growing at a steady rate for ever: next year's cash flow divided by the required return less the growth rate. It is the same formula as the Gordon growth model for shares. With the defaults, $250,000 of SDE less an $80,000 market salary leaves $170,000; a year of 3% growth makes $175,100; divided by 22% that is $795,909, or 3.18 times SDE.
- It is the yearly return a buyer would want for taking on this business's risk, and it is a judgement, not a published number. The 25% default is an example. Try several values and watch the estimate move: the capitalised value is very sensitive to it, because it divides by the gap between the return and the growth rate.
- Because the formula divides by the difference. As growth approaches the return the value grows without limit, and at or above it the formula means nothing. The calculator refuses those inputs. Long-run growth here means growth the business can keep up indefinitely, not next year's.
- No. It is arithmetic on assumptions you choose. A valuation for a sale, a bank loan, tax, an estate or a legal dispute needs a qualified business appraiser who has examined the accounts, the add-backs and the market for the business.
- It varies by sector. In BizBuySell's Q2 2026 report, service businesses had a median of 155 days on market, and manufacturing transactions took 247 days to close. Add the preparation before listing: tidy accounts and documented add-backs make a business easier to finance and to sell.
- Many buyers will ask. In BizBuySell's Q2 2026 report, 90% of buyers expected seller financing to be part of their acquisition, while only 29% of business owners planned to offer it. A seller note means part of the price arrives over time and depends on the buyer paying it, so weigh the price you are offered against how it is paid.
- The arithmetic works in any currency; the labels say USD only because the one market figure quoted is from the US. BizBuySell's averages describe US deals reported by US brokers, and we have no comparable published series for Singapore or Southeast Asia, so for a business there the multiples have to come from local comparable sales.
- No. The calculation runs in your browser; the figures you type are not sent to our server.
Method & sources
How it computes
Multiple method: value = earnings (SDE or EBITDA) x the reader's low and high multiples and their midpoint. Cross-check: capitalised earnings = CF x (1 + g) / (r - g), r > g, with CF = SDE less a market salary for running the business (EBITDA as entered). Inventory the buyer pays for separately is added to both; equipment is not. Integer cents (BusinessValuationKernel). Not a formal valuation.
What this tool implements
- Seller's Discretionary Earnings = pre-tax profit + owner's salary and benefits + interest + depreciation + amortisation + non-recurring costs; EBITDA is offered for businesses already paying management. The page warns that multiples must be measured on the same basis as the earnings.
- The multiples are the reader's inputs. No per-industry table is held: none could be read from a primary source. BizBuySell's Q2 2026 average cash-flow multiple (2.7, across 2,117 US sales) is quoted for scale only.
- Capitalised earnings uses the single-stage growth model, the same formula as RecaCorpFin.gordon in corpfin-kernel.js; the suite checks the two agree. On an SDE basis a market salary is deducted first, since SDE adds the owner's pay back; if that leaves no cash flow, the page says the buyer would be buying a job rather than printing a value.
- Corrected 2026-10-17: the per-industry multiple bands and the qualitative adjustments (growth, owner dependence, concentration, age) had no source and are removed from the arithmetic; all tangible assets were added on top of an earnings value, counting equipment twice (now inventory only, optional); BizBuySell full-year 2024 figures, read via a summary, replaced by Q2 2026 figures read raw; the pull-quote was the page's own sentence inside quotation marks attributed by implication to BizBuySell (replaced by BizBuySell's actual words, linked); "SBA 7(a) is the dominant funding source" (unsourced) replaced by SBA's own statement that 7(a) loans fund changes of ownership up to $5 million; "not a formal valuation" now stated.
Sources
- BizBuySell. Insight Report, Q2 2026 (2,117 transactions; average cash-flow multiple 2.7; median sale price $349,250; median cash flow $155,921). https://www.bizbuysell.com/insight-report/ — read via the Internet Archive copy of 2026-10-04: https://web.archive.org/web/20261004064227/https://www.bizbuysell…
- U.S. Small Business Administration. 7(a) loans (uses include changes of ownership; maximum loan amount $5 million). https://www.sba.gov/funding-programs/loans/7a-loans
What can make this go out of date
- None at runtime; nothing the reader types is sent anywhere.
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