Business Valuation Methodology

Our calculator uses two of the most common methods for valuing small-to-medium enterprises (SMEs): the SDE Multiplier Method and the Revenue Multiplier Method.

1. Seller's Discretionary Earnings (SDE)

SDE is the total financial benefit a single full-time owner-operator derives from the business. It is calculated as: Net Profit + Add-backs. Add-backs include the owner's salary, personal travel, one-time legal fees, and non-cash items like depreciation.

2. The Multiplier Effect

Multipliers represent the risk and growth potential of a business. A higher multiplier (e.g., 5x for SaaS) indicates lower risk and higher recurring revenue, while a lower multiplier (e.g., 1.5x for a local service) reflects higher dependency on the owner or lower barriers to entry.

3. Final Valuation

We provide an average of both methods to give a balanced market estimate. However, factors like brand strength, customer concentration, and market conditions will ultimately influence the final sale price.