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Business Valuation Calculator

Free Business Valuation Calculator

Estimate the value of your service business with our free business valuation calculator. Use Seller's Discretionary Earnings (SDE) and a valuation multiple to calculate an estimated business value.

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Estimate Your Business Value with Arrivy

Enter your business earnings and owner add-backs to calculate your Seller's Discretionary Earnings (SDE). Then apply a valuation multiple to estimate the value of your business.

Earnings

Start with your bottom line, then add back what a new owner wouldn't inherit.

Annual revenue

Net profit (pre-tax)

Add-backs

Owner-specific and one-time costs a buyer adds back to find true earning power (SDE).

Owner's compensation

Owner perks (vehicle, insurance)

Depreciation & amortization

Interest

One-time / non-recurring expenses (legal, repairs, moves)

Valuation multiple

What buyers pay per $1 of SDE. Recurring contracts and low owner-dependence push it up.

Multiple (× SDE)3.0×

Estimated business value

SDE

Multiple

3.0×

SDE margin

How SDE is built

Net profit

Total add-backs

SDE

Value range

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Estimates use your inputs — adjust to match your real costs. Benchmarks are starting points, not advice.

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Understanding Business Value

A business valuation is typically based on two key factors: Seller’s Discretionary Earnings (SDE) and the valuation multiple. SDE reflects the financial performance of an owner-operated business after appropriate owner add-backs, while the multiple reflects factors such as business performance, recurring revenue, customer relationships, and operational stability. Understanding both provides a useful starting point for estimating business value.

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How To Value Service Business

Use the business valuation calculator above or follow these six steps to estimate your business value. For many owner-operated service businesses, Seller's Discretionary Earnings (SDE) is commonly used as a starting point for estimating business value.

1. Start with net profit. Use your business's net profit as the starting point for the calculation.
2. Add owner compensation. Include owner salary, draws, or other compensation that may be considered part of the owner's discretionary earnings.
3. Include eligible owner add-backs. Add qualifying personal expenses, one-time costs, or other appropriate owner add-backs where applicable.
4. Calculate Seller's Discretionary Earnings (SDE). Combine your net profit and eligible add-backs to estimate your SDE.
5. Apply a valuation multiple. Select an appropriate valuation multiple based on your business, industry, and other relevant factors to estimate business value.
6. Review the estimated valuation. Use the results as a planning tool to better understand your business's estimated value. For transactions or formal valuations, consult a qualified valuation professional.

Common Elements of a Business Valuation

A business valuation for an owner-operated service business typically includes:

Net profit

The business's net profit, which serves as the starting point for the valuation.

Owner compensation

Owner salary, draws, or other compensation that may be added back when calculating Seller's Discretionary Earnings (SDE).

Owner add-backs

Eligible personal expenses or one-time business costs that may be adjusted when estimating SDE.

Seller's Discretionary Earnings (SDE)

The estimated earnings available to an owner after applying eligible add-backs.

Valuation multiple

A multiplier used to estimate business value based on factors such as business performance, industry, and operational characteristics.

Estimated business value

The estimated value calculated using SDE and the selected valuation multiple.

Frequently Asked Questions

Seller's Discretionary Earnings (SDE) is a measure commonly used to estimate the value of owner-operated businesses. It starts with net profit and adds back eligible owner compensation and other qualifying expenses to estimate the financial benefit available to an owner.

SDE is commonly used for many owner-operated businesses because it includes eligible owner compensation and certain owner-specific adjustments. EBITDA is another financial metric used in business valuation, particularly for businesses with different ownership or management structures. The appropriate valuation method depends on the business and the purpose of the valuation.

Business value may be influenced by financial performance, recurring revenue, customer relationships, growth potential, industry conditions, operational efficiency, and other business-specific factors. The importance of each factor varies depending on the business and the valuation approach used.

No. This calculator provides an estimated business value for planning and educational purposes. A formal business valuation for a sale, financing, legal matter, or tax purpose should be completed by a qualified valuation professional using detailed financial information.

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