Business Valuation Calculator
Estimate business valuation using revenue multiples, EBITDA, and assets methods.
What this calculator does
This business valuation calculator produces a value range using the two market approaches buyers most commonly apply. Enter your revenue, EBITDA, and the multiples appropriate to your industry, and it returns a valuation from each method plus their average, giving you a range rather than a single misleading number.
The output is an estimate of what a buyer might pay, not what the business is worth to you. Market value is set by comparable transactions and by the risk a buyer perceives in your specific earnings. The calculator handles the arithmetic; the multiple you choose carries almost all of the judgment.
When to use it
The most productive use is years before a sale, not during one. Running the calculation annually shows which lever moves value most — usually margin improvement rather than revenue growth, because the multiple amplifies every dollar of earnings.
It is also the right starting point when an unsolicited offer arrives, which is how a large share of small businesses actually get sold. Having a defensible independent number before responding changes the conversation entirely. And it is essential for partner buyouts, where two people need a shared basis for a price rather than competing intuitions.
Understanding the inputs
Revenue should be trailing twelve months, and normalized if the period contained anything unrepresentative. EBITDA is earnings before interest, taxes, depreciation, and amortization — but the figure buyers actually use is adjusted EBITDA, after add-backs for above-market owner compensation, personal expenses, and genuinely one-time items.
The multiples carry the real weight. EBITDA multiples for small businesses commonly run three to six, rising with size, recurring revenue, and management depth. Revenue multiples are typically well under one for services and distribution, and considerably higher for software. Use comparable transaction data for your sector rather than a general figure, since the multiple drives the answer far more than the earnings do.
How is this calculated?
Revenue Method: Value = Revenue × Multiple. EBITDA Method: Value = EBITDA × Multiple. Average the two approaches for a range.
A worked example
A distribution business reports $3.2 million in revenue and $520,000 in EBITDA. At a 4.5 times EBITDA multiple it values at $2.34 million; at a 0.8 times revenue multiple, $2.56 million. The average of roughly $2.45 million is a reasonable opening range for negotiation.
Now normalize the earnings. The owner draws $180,000 against a market rate of $110,000 for the role, giving a $70,000 add-back and adjusted EBITDA of $590,000. At the same 4.5 times multiple that is $2.66 million — a $315,000 increase from a bookkeeping adjustment. This is precisely why add-backs are the most contested part of any deal.
Limitations and assumptions
The calculator applies multiples you supply, so it inherits whatever optimism is in them. It captures nothing about customer concentration, owner dependency, contract quality, or the state of your systems and records, all of which buyers price heavily and all of which can move the multiple by a full turn.
It also produces enterprise value rather than the cash you would receive, ignoring debt, working capital adjustments, transaction fees, and taxes on the sale. For any legally consequential purpose — a buy-sell agreement, estate planning, or a 409A valuation — engage a credentialed appraiser. Use this to orient yourself and to prepare, not as the number you take to a negotiation as fact.
Common Questions
- How are small businesses actually valued?
- Most main-street businesses trade on a multiple of seller's discretionary earnings, commonly two to four times. Larger lower-middle-market companies with real management depth trade on EBITDA, often four to seven times. Revenue multiples apply mainly to software and high-growth businesses where earnings are deliberately suppressed for growth.
- What is the difference between EBITDA and SDE?
- SDE adds the owner's salary and personal benefits back to EBITDA, because a buyer stepping into the owner's role captures that. It suits businesses under roughly $1 million in earnings, where the owner works in the business. Above that, buyers use EBITDA and expect to hire a manager.
- What are add-backs and why do they matter so much?
- Add-backs are one-time or personal expenses removed from earnings to show what the business truly generates — an above-market owner salary, a family vehicle, a legal settlement that will not recur. At a five times multiple, every dollar of legitimate add-back adds five dollars of value, which is why buyers scrutinize them closely.
- Why do two valuation methods give different answers?
- Because they measure different things. A revenue multiple rewards scale and growth; an EBITDA multiple rewards profitability. A business growing fast at low margins values higher on revenue, and a mature profitable one higher on EBITDA. The gap between the two is information about the company, not an error.
- What drives a higher multiple within the same industry?
- Recurring revenue, customer concentration below roughly 20 percent from any single client, documented systems, a management team that survives the owner's departure, and clean financials. Businesses where the owner is the product trade at a discount regardless of profit, because the earnings do not transfer with the sale.
- Does this valuation include or exclude debt?
- A multiple applied to EBITDA gives enterprise value, which is the value of the business before debt. To reach equity value — what a seller actually receives — subtract interest-bearing debt and add surplus cash. Most small transactions are structured cash-free and debt-free, so this distinction matters at closing.
- How much does customer concentration reduce value?
- Considerably. A buyer looking at a business where one client provides 40 percent of revenue is underwriting the risk that the client leaves after closing. That commonly costs a full turn of EBITDA or more, and may push a buyer toward an earnout rather than cash at close.
- What is an earnout and should I expect one?
- An earnout defers part of the price, paid only if the business hits agreed targets after sale. Buyers use them to bridge a valuation gap or to hedge risks like customer concentration. Expect one if your business has any dependency on you personally. Negotiate the measurement terms carefully — they matter more than the headline number.
- When do I need a formal valuation instead of this?
- For anything with legal or tax consequences: buy-sell agreements, divorce, estate planning, gift tax, or a 409A for option pricing. Those require a credentialed appraiser and a defensible methodology. Use this calculator for orientation and negotiation preparation, not for a document anyone will rely on formally.