How Much Can I Sell My Business for Calculator

Business Valuation Calculator: How Much Can I Sell My Business For?

Use this calculator to get an estimated valuation of your business based on the Seller's Discretionary Earnings (SDE) multiple method. This is a common approach for valuing small to medium-sized businesses.

function calculateBusinessValue() { var annualRevenue = parseFloat(document.getElementById('annualRevenue').value); var cogs = parseFloat(document.getElementById('cogs').value); var operatingExpenses = parseFloat(document.getElementById('operatingExpenses').value); var ownerSalaryBenefits = parseFloat(document.getElementById('ownerSalaryBenefits').value); var nonRecurringAddbacks = parseFloat(document.getElementById('nonRecurringAddbacks').value); var industryMultiple = parseFloat(document.getElementById('industryMultiple').value); // Validate inputs if (isNaN(annualRevenue) || isNaN(cogs) || isNaN(operatingExpenses) || isNaN(ownerSalaryBenefits) || isNaN(nonRecurringAddbacks) || isNaN(industryMultiple)) { document.getElementById('businessValueResult').innerHTML = "Please enter valid numbers for all fields."; return; } if (annualRevenue < 0 || cogs < 0 || operatingExpenses < 0 || ownerSalaryBenefits < 0 || nonRecurringAddbacks < 0 || industryMultiple <= 0) { document.getElementById('businessValueResult').innerHTML = "Please enter positive values. Industry Multiple must be greater than zero."; return; } // Step 1: Calculate Gross Profit var grossProfit = annualRevenue – cogs; // Step 2: Calculate Operating Profit (before owner's comp, etc.) var operatingProfit = grossProfit – operatingExpenses; // Step 3: Calculate Seller's Discretionary Earnings (SDE) // SDE = Operating Profit + Owner's Salary/Benefits + Non-Recurring Expenses/Add-backs var sde = operatingProfit + ownerSalaryBenefits + nonRecurringAddbacks; // Step 4: Calculate Estimated Business Value var estimatedBusinessValue = sde * industryMultiple; // Display results var resultHTML = "

Estimated Business Valuation:

"; resultHTML += "Seller's Discretionary Earnings (SDE): $" + sde.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + ""; resultHTML += "Estimated Business Value: $" + estimatedBusinessValue.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + ""; resultHTML += "This is an estimate based on the SDE multiple method and should not be considered a definitive valuation. Consult with a professional business broker or appraiser for a precise valuation."; document.getElementById('businessValueResult').innerHTML = resultHTML; }

Understanding Your Business's Value: The SDE Multiple Method

Determining how much you can sell your business for is a critical step for any entrepreneur considering an exit. While professional business valuations can be complex and involve multiple methodologies, one of the most common and accessible methods for small to medium-sized businesses is the Seller's Discretionary Earnings (SDE) multiple approach.

What is Seller's Discretionary Earnings (SDE)?

SDE represents the total financial benefit an owner-operator receives from a business before income taxes, non-recurring expenses, and non-operating income and expenses. It's essentially the total cash flow available to a single owner-operator, including their salary, benefits, and any perks they take from the business. It aims to show a prospective buyer the true earning potential of the business if they were to step into the owner's shoes.

The formula for SDE typically looks like this:

SDE = Net Profit + Owner's Salary + Owner's Benefits + Interest + Depreciation + Amortization + Non-Recurring Expenses

Our calculator simplifies this by focusing on the core components: Annual Revenue, Cost of Goods Sold, Operating Expenses (excluding owner's compensation and non-cash items like depreciation/amortization), Owner's Salary & Benefits, and Non-Recurring Expenses/Add-backs.

The Role of the Industry Multiple

Once SDE is calculated, it's multiplied by an "industry multiple" to arrive at an estimated business value. This multiple is a factor that reflects various aspects of your business and industry, such as:

• Industry Risk: Stable industries often command higher multiples.
• Growth Potential: Businesses with strong growth prospects are more attractive.
• Market Demand: How many buyers are looking for businesses like yours?
• Transferability: How easily can the business operations be transferred to a new owner?
• Customer Concentration: A diverse customer base is better than reliance on a few key clients.
• Systems and Processes: Well-documented operations increase value.
• Asset Base: While SDE focuses on earnings, significant tangible assets can also influence the multiple.

Industry multiples can vary widely, typically ranging from 1.5x to 4x or even higher for very strong businesses in high-demand sectors. It's crucial to research typical multiples for businesses similar to yours in your specific industry and geographic location.

How to Use the Calculator Inputs:

• Annual Revenue: Your total sales for the most recent fiscal year.
• Cost of Goods Sold (COGS): Direct costs attributable to the production of the goods or services sold by your business.
• Operating Expenses (Excluding Owner's Salary, Depreciation, Interest): All other regular business expenses like rent, utilities, marketing, employee wages (excluding owner's), insurance, etc. Make sure to exclude non-cash expenses like depreciation and amortization, and interest payments.
• Owner's Salary & Benefits: The total compensation, including salary, health insurance, car allowances, personal travel, or any other perks the owner takes from the business.
• Non-Recurring Expenses / Add-backs: One-time expenses that a new owner would not incur (e.g., a lawsuit settlement, a large one-off repair, personal expenses run through the business). These are "added back" to show the true operational profitability.
• Industry Multiple: This is the most subjective input. Research average multiples for your specific industry. A business broker can provide valuable insight here.

Example Scenario:

Let's say you own a successful landscaping business with the following financials:

• Annual Revenue: $750,000
• Cost of Goods Sold (COGS): $250,000
• Operating Expenses (excluding owner's comp, D&A, interest): $180,000
• Owner's Salary & Benefits: $150,000
• Non-Recurring Expenses / Add-backs: $15,000 (e.g., a one-time equipment repair)
• Industry Multiple (for landscaping): 2.75x

Using the calculator:

1. Gross Profit = $750,000 – $250,000 = $500,000
2. Operating Profit = $500,000 – $180,000 = $320,000
3. SDE = $320,000 (Operating Profit) + $150,000 (Owner's Comp) + $15,000 (Add-backs) = $485,000
4. Estimated Business Value = $485,000 (SDE) * 2.75 (Multiple) = $1,333,750

This would give you an estimated business value of approximately $1,333,750.

Important Considerations:

This calculator provides a basic estimate. A true business valuation involves a deeper dive into financial statements, market conditions, competitive landscape, intellectual property, customer relationships, and many other qualitative factors. Always consult with a qualified business broker, M&A advisor, or appraiser for a comprehensive and accurate valuation of your business.