Business Valuation Calculator

Most owners begin from the bottom line of their tax return, and it is the single most common reason they undervalue their own business. That figure is the output of years of entirely legitimate minimisation — a salary you set, a vehicle, health cover, a conference in a nice city, an accountant instructed to keep the taxable number down.

A buyer does not purchase your taxable income. They purchase the total stream of benefit the business delivers to whoever sits in your chair, and reconstructing it is what seller's discretionary earnings does: net profit, plus one working owner's full compensation, plus the perks a new owner would not inherit, plus genuine one-offs, plus non-cash charges.

The reconstruction routinely doubles the headline. A firm showing $120,000 of profit while paying its owner $90,000 with $18,000 of perks and $12,000 of depreciation is a $240,000 business, and every valuation conversation should start there.

It cuts the other way too, and an honest count includes it. A spouse doing the books unpaid, a second owner working without salary — those are costs the buyer will actually bear, and pretending otherwise is precisely the kind of adjustment that dies in due diligence.

No calculation produces the multiple. It is what buyers in your market are currently paying for businesses like yours, the way a house price is what houses on your street sell for. Most owner-operated businesses change hands somewhere between two and four times SDE, and where yours falls in that band is decided by a short list of factors.

Transferability leads the list. Recurring revenue beats project revenue; contracts beat handshakes; a customer base where no client is a tenth of sales beats one anchor account. A trend matters more than a level — a flat $240,000 outsells a declining $300,000. Clean, GAAP-ish books with two or three years of consistency are themselves worth a fraction of a turn, because everything the buyer cannot verify gets discounted.

It helps to hold the buyer's framing in mind. A 3× multiple means they part with three years of the business's entire earnings and need the machine to keep running, without you, long enough to get that back. That is why small firms do not trade at public-market multiples, and why the discount deepens for anything that looks fragile.

One boundary worth knowing: SDE is the metric for businesses that come with a working owner. Once a firm has real management in place and the owner is genuinely passive, the market shifts to EBITDA — which deducts a market salary for the manager before multiplying. The multiple quoted gets bigger, but the number under it gets smaller, and comparing an SDE multiple to an EBITDA multiple is the classic way sellers talk past buyers.

The price agreed is not the cheque received, and three adjustments do most of the damage.

Small business deals are conventionally debt-free, cash-free: you keep the cash in the account, and every loan and financed asset is settled at closing out of your proceeds. Working capital is negotiated on top — a buyer expects enough inventory and receivables to run the business, and a "peg" below the normal level claws back the difference.

Structure decides the tax. Almost all small deals are asset sales, because the buyer gets to depreciate what they bought all over again — but the allocation then matters enormously to you, since amounts assigned to equipment recapture prior depreciation at ordinary rates while goodwill takes long-term capital gains treatment. The same headline price can differ by tens of thousands after tax depending on a schedule negotiated in an afternoon.

And expect to finance part of it yourself. Seller notes and earnouts are standard in this market precisely because buyers use them to keep the seller invested in the transition. An earnout tied to revenue you no longer control is the riskiest dollar in the deal; price it accordingly, and treat the cash at closing as the real number.