How much is my small business worth?

Most owner-operated small businesses sell for 2–4× annual owner earnings. Businesses with recurring revenue, documented systems, and a team that runs without the owner reach the higher end or beyond.

Should I value on profit or revenue?

Profit, in almost every case. Revenue multiples are used when profit is deliberately reinvested for growth, as with software, or when profit figures are unreliable.

What is seller's discretionary earnings?

SDE is net profit plus the owner's salary, personal expenses run through the business, interest, tax, and depreciation. It shows a buyer what the business would produce for them as an owner-operator.

Does a valuation calculator replace an appraisal?

No. A calculator frames the conversation. A sale, a bank loan, a divorce, or a tax event needs a formal valuation by an accredited appraiser working from your actual financials.

How to Value a Small Business (multiples, ranges, red flags)

Small businesses aren't valued by formula alone — they're valued on how much provable profit a buyer inherits and how little of it depends on you.

Step 1: get to a profit number a buyer will believe

Reported net profit is rarely the right starting point for an owner-operated business, because it's shaped by tax planning. Buyers normalise it into seller's discretionary earnings: net profit plus the owner's salary, one-off costs, personal expenses run through the books, interest, tax, depreciation and amortization.

Step 2: pick a defensible multiple

Business type	Typical multiple of earnings
Owner-dependent service business	2–3×
Established business with staff and systems	3–4×
E-commerce or product brand with repeat customers	2.5–4×
Software or subscription revenue	4–8×

Step 3: adjust for what's included

Add the value of equipment, vehicles, and inventory transferring with the sale. Subtract debt the buyer assumes. Working capital is usually negotiated separately — agree early whether it's in or out.

What pushes the multiple up

Recurring or contracted revenue rather than one-off sales
No single customer above roughly 15% of revenue
Documented processes and a team that operates without the owner
Three years of clean, reconciled financials
Growth that can be explained and repeated

What pulls it down

The owner is the business — all relationships and knowledge sit with one person
Customer concentration, or revenue tied to one platform or one contract
Messy books, cash sales, undocumented add-backs
Declining revenue, whatever the explanation

A worked example

A design studio reports $40,000 net profit, pays the owner $50,000, and carries $6,000 of depreciation and $4,000 of interest. Normalised earnings are $100,000. It has two employees, documented processes, and no client above 12% of revenue, so a 3.5× multiple is defensible: $350,000. Add $15,000 of equipment, subtract a $20,000 loan → $345,000, with a realistic range of roughly $276,000 to $414,000.

Before you take a number to market

Get three years of financials reconciled, list your add-backs with evidence, and be ready to explain what the buyer is inheriting beyond the profit. A valuation is only as strong as the paperwork behind it.