How to value a small business
Seller’s discretionary earnings (SDE) = pre-tax profit + one owner’s pay and perks + interest + depreciation and amortization + one-off or personal costs run through the business
Estimated value = SDE × a multiple
Example: $120,000 of profit, $90,000 of owner’s pay, $6,000 of interest, $14,000 of depreciation and $20,000 of one-off costs add up to $250,000 of SDE. At 2.0 to 3.1 times SDE, the range business brokers reported for sales up to $2 million in Q2 2026 (IBBA and M&A Source Market Pulse), that’s $500,000 to $775,000.
A startup round: post-money valuation = amount raised ÷ share sold, and pre-money valuation = post-money − amount raised. Raising $500,000 for 20% of the company gives $2,500,000 post-money and $2,000,000 pre-money.
What your business is worth to a buyer
Business brokers usually price a small business as a multiple of what it earns for its owner. That figure is called seller’s discretionary earnings, or SDE: your profit, plus your own pay and the costs a new owner wouldn’t carry. This business valuation calculator adds up your SDE and multiplies it by a low and a high multiple, so you get a range instead of one falsely precise number.
Where the multiple comes from
The multiple is the hard part. It moves with your size, your industry, how steady your sales are and how much the business depends on you. In the IBBA and M&A Source Market Pulse survey for Q2 2026, business brokers and M&A advisors reported 2.0 times SDE for sales under $500,000, 2.8 for $500,000 to $1 million and 3.1 for $1 million to $2 million. A broker who sells businesses like yours can give you a closer number.
An estimate, not an appraisal
Use this as a starting point, not a price. A buyer will go through your books, your customers and your risks, and the terms of a deal matter as much as the headline number. If you’re selling, raising money or splitting a company, get a proper valuation from a qualified appraiser or advisor. For a startup without steady profits, switch the calculator to a funding round: there, the valuation comes from what investors pay for their share.
FAQs
How do I calculate my business valuation?
Add up your seller’s discretionary earnings: pre-tax profit, plus one owner’s pay and perks, interest, depreciation and amortization, and any one-off or personal costs run through the business. Multiply that by a multiple. Business brokers reported 2.0 to 3.1 times SDE for sales up to $2 million in Q2 2026 (IBBA and M&A Source Market Pulse). In the same survey, larger sales were priced on EBITDA instead.
How much is a business worth with $1,000,000 in sales?
Sales alone won’t tell you, because buyers pay for earnings. Two businesses with $1 million in sales can be worth very different amounts. If one has $250,000 of SDE, 2.0 to 3.1 times that is $500,000 to $775,000. If the other has $50,000 of SDE, the same multiples give $100,000 to $155,000. Work out your SDE first.
How much is a business worth that makes $300,000 a year?
If the $300,000 is SDE, multiples of 2.0 to 3.1 put it at roughly $600,000 to $930,000. At 2.8 times, the multiple brokers reported for sales of $500,000 to $1 million in Q2 2026 (IBBA and M&A Source Market Pulse), it’s $840,000. If the $300,000 is revenue, work out the earnings first: the price follows the profit, not the sales.
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