Business & Acquisition
Small businesses are priced on a multiple of earnings, so almost every question here reduces to two: which earnings, and which multiple. These calculators work through the first properly — addbacks, the owner's own salary, what a lender will count — and are honest that the second is a negotiation rather than a formula.
Calculators in Business & Acquisition
- Business ValuationEstimate value from earnings and a multiple rangeCalculate
- SDE CalculatorSeller's discretionary earnings from a P&LCalculate
- EBITDA CalculatorEarnings before interest, tax, depreciation and amortizationCalculate
- Business AcquisitionWhat a deal costs to close and to carryCalculate
- Business AffordabilityThe size of business your capital and income supportCalculate
- DSCR CalculatorWhether earnings cover the debt a lender will requireCalculate
Other categories
- Salary & PaycheckWhat you actually take home, and what an offer is really worth.
- Loans & DebtPayments, payoff order, and the true cost of borrowing.
- Mortgage & Real EstateMonthly payment, affordability, refinancing and equity.
- Investing & SavingsHow capital grows, and what a contribution changes.
- Auto FinanceFinancing, leasing, and what a car costs to keep.
About business & acquisition
Small businesses are priced on a multiple of earnings, so almost every question in this category reduces to two: which earnings, and which multiple.
Which earnings is not a technicality. SDE — seller's discretionary earnings — is what the business produces for one working owner, and it adds the owner's own compensation back to profit. EBITDA does not, because it describes a business run by paid management. The difference between them is the market cost of replacing the owner, and a seller quoting SDE and a buyer valuing EBITDA can be a whole salary apart before either has mentioned a multiple. At a 3× multiple, an $85,000 salary is $255,000 of price on the same company.
Which multiple is a negotiation rather than a formula. It depends on the industry, the size, the growth, how concentrated the customers are, how dependent the business is on the owner personally, and what buyers are paying this year. Nothing on this site will tell you what yours is, because nothing honestly can. What these calculators do is show what each multiple is worth, so the conversation is informed.
What goes wrong here
Each of these costs real money, and each is avoidable once it is named.
Comparing offers on different earnings bases
A 5× EBITDA offer and a 3× SDE offer on the same business are not obviously ranked. Convert both to the same basis before deciding which is larger.
Building the addback schedule from memory
Every addback is multiplied. At 3×, a $12,000 addback a buyer rejects costs the seller $36,000 of price — which is why diligence spends more time here than anywhere else in a small deal, and why the schedule should come from documents.
Budgeting only for the deposit
Closing costs and working capital are paid in cash on the same day. On a typical deal the deposit is barely half the cash actually required, and buyers who miss that run out of money in month one.
Treating EBITDA as cash flow
It ignores capital expenditure, working capital movements and debt service. A business with heavy equipment replacement can report strong EBITDA and generate very little cash.
Questions people ask
SDE for an owner-operated business, which is most of what sells below a few million dollars. EBITDA once the business runs under management, because a buyer who must hire a manager cannot also count the owner's salary as earnings. The calculators here compute both from the same figures so they cannot disagree.
1.25× is common and it is not universal — it varies by lender, by programme, by industry and over time. It is a field in these calculators rather than a constant for exactly that reason. Put in what your lender told you, not what a calculator assumed.
At a fixed multiple, the opposite. Earnings rise with the price while your salary does not, so coverage improves as the business grows. Earnings set a floor on the size that works, not a ceiling — and the binding constraint for most buyers is the deposit.