What’s my business roughly worth?

Why SDE multiples are how small businesses are actually valued

Large companies are valued on EBITDA. Small businesses (under $5M in revenue) are valued on SDE because the owner's compensation is a discretionary expense. A new owner might pay themselves more or less, so SDE strips out the owner's total economic benefit to show the true cash-generating power of the business.

The multiple depends on industry, growth rate, owner dependence, and customer concentration. BizBuySell's annual data shows the median small business sells for about 2.3x SDE, but the range is wide: some sell for 1.2x (struggling, owner-dependent) and others for 4x+ (growing, recurring revenue, team-run).

This is not a formal valuation. A business broker or appraiser will go deeper. But it gets you within 20-30% of reality, which is enough to inform your decisions about whether to invest in growth, take distributions, or start planning an exit.

How to estimate your business value step by step

1. 1
   Calculate annual SDE from your P&L

   In QuickBooks or Xero, run a Profit and Loss for the last 12 months. Start with Net Income. Add back: your salary, personal benefits, personal expenses run through the business, depreciation, and any one-time costs. That is your SDE.

2. 2
   Find comparable multiples on BizBuySell

   Go to BizBuySell.com and search for recently sold businesses in your industry and size range. Look at the asking price relative to cash flow. Also check the BizBuySell Insight Report for median multiples by industry.

3. 3
   Adjust the multiple for your specific factors

   Start with the industry median. Add 0.25-0.5x if revenue is growing 15%+ per year. Subtract 0.25-0.5x if you are highly owner-dependent (you personally deliver most of the work). Subtract 0.25x if your top client is 30%+ of revenue.

4. 4
   Calculate the range

   Multiply your SDE by the adjusted multiple. Use a range (e.g., 2.0x to 3.0x) rather than a single number. If SDE is $150,000 and your adjusted range is 2.0x to 3.0x, your business is worth roughly $300,000 to $450,000.

Five factors that move your valuation multiple up or down

• Revenue growth rate. Growing businesses command higher multiples because the buyer is purchasing future earnings, not just current ones.
• Owner dependence. Can the business run without you for 30 days? If not, the value is heavily discounted because the buyer is inheriting a job.
• Revenue concentration. High concentration in one or two customers is risky for a buyer. If they leave post-sale, the business implodes.
• Recurring vs. project revenue. Businesses with recurring revenue (subscriptions, contracts, retainers) are worth more than businesses that start from zero each month.
• Industry trends. A business in a growing industry commands a premium. One in a declining industry gets discounted.

Or get an automatic valuation estimate based on your real numbers

Bottomline connects to your accounting software and calculates your SDE, applies industry multiples, and adjusts for growth, concentration, and other factors:

Bottomline updates this estimate as your financials change and shows you which specific actions (reducing owner dependence, diversifying revenue, growing margins) would have the biggest impact on your valuation.