Small Business Valuation Calculator
Enter your seller's discretionary earnings and the multiple that fits your business model. The tool estimates a reasonable sale price range after applying growth expectations, included assets, and a risk discount.
How this small business valuation calculator works
This tool is designed for side hustles, micro businesses, and owner-operated small businesses. It estimates what a buyer might pay for your business today based on seller’s discretionary earnings (SDE), a chosen earnings multiple, simple growth expectations, and risk or transition adjustments.
It is not a formal appraisal. Instead, it helps you get into a realistic ballpark before talking with buyers, brokers, or an accountant.
Core valuation formula
The calculator values your business in five steps:
- Start with annual seller’s discretionary earnings (SDE).
- Adjust SDE up or down for one year of expected growth or decline.
- Multiply by a market-based earnings multiple.
- Add assets that transfer with the sale and subtract required working capital and assumed debt.
- Apply a risk or transition discount to account for uncertainty.
In formula form:
Where:
- SDE = seller’s discretionary earnings (annual)
- g = growth adjustment for next year (%)
- M = earnings multiple (how many times SDE a buyer might pay)
- A = inventory or assets included in the sale
- W = working capital the buyer must add
- D = business debt the buyer will assume
- r = risk or transition discount (%)
Interpreting the inputs
Seller’s discretionary earnings (SDE). SDE is your business profit plus the owner benefits you take out. Start from net income on your tax return or profit and loss statement, then add back your own salary, health insurance, and clearly personal expenses run through the business. For owner-operated side hustles, SDE is usually the best starting point.
Business profile and multiple. The profile dropdown gives a typical SDE multiple range for common micro-business models (such as solo services, e-commerce, or subscriptions). Buyers of small, owner-heavy businesses often pay around 1.5× to 4× SDE. Strong systems, recurring revenue, and low owner dependence support higher multiples; platform risk, key-person risk, and customer concentration push multiples down.
Growth adjustment (%). If you expect the business to grow next year, enter a positive percentage (for example, 10 for 10% growth). If it is shrinking or you expect a one-time loss of revenue, enter a negative percentage. The calculator scales SDE before applying the multiple so buyers can see earnings on a “next year” basis.
Assets, working capital, and debt. Inventory, equipment, or other assets that clearly transfer with the business are added on top of the earnings-based value. Required working capital (such as cash a buyer must inject to keep operations running) and any business debt they will take over reduce the value.
Risk or transition discount (%). Many micro-acquisitions apply a discount in the 5–20% range to recognize execution risk. Use a higher discount if the business depends on one platform (for example, a single marketplace or algorithm), a few key customers, or undocumented processes that live only in your head. A lower discount is more appropriate when the business has clean books, diversified revenue, and documented handover plans.
Worked example: solo service side hustle
Imagine a solo web designer running a part-time side business:
- SDE: $40,000 per year (after adding back owner salary and perks)
- Profile: solo service or freelancing
- Chosen multiple (M): 2.0× SDE
- Growth (g): 5% (modest expected increase in demand)
- Assets (A): $2,000 of computer equipment included in the sale
- Working capital (W): $0 (clients pay deposits, little cash is needed up front)
- Debt (D): $0 (no business loans transfer)
- Risk discount (r): 15% (clients are concentrated and most work is tied to the owner)
Step 1: Adjust SDE for growth:
$40,000 × (1 + 5÷100) = $40,000 × 1.05 = $42,000
Step 2: Apply the multiple:
$42,000 × 2.0 = $84,000
Step 3: Add assets and subtract working capital and debt:
$84,000 + $2,000 - $0 - $0 = $86,000
Step 4: Apply the risk discount:
$86,000 × (1 - 15÷100) = $86,000 × 0.85 = $73,100
The estimated value of this side hustle is about $73,000. A serious buyer might negotiate up or down based on how easily work can be transferred and how involved the owner will be during the handover.
How this method compares to other valuation approaches
The calculator uses an SDE multiple approach because it matches how many real-world buyers evaluate small, owner-operated businesses. Larger companies and startups are often valued using other methods, such as EBITDA multiples, revenue multiples, or discounted cash flow (DCF). The table below outlines where each method is most useful.
| Method | Typical use case | Pros | Cons |
|---|---|---|---|
| SDE multiple (this calculator) | Side hustles, micro businesses, owner-operator service and e-commerce businesses | Reflects total economic benefit to an owner; simple to explain; widely used in main-street deals | Assumes a single full-time owner-operator; less suitable for businesses with management teams |
| EBITDA multiple | Larger small businesses and lower-middle-market companies | Focuses on operating performance independent of owner; aligns with many professional buyers | Requires clean financials; may understate value of owner perks in very small businesses |
| Revenue multiple | High-growth startups, SaaS, marketplaces with thin or reinvested profits | Useful when current profit is not representative; quick for back-of-the-envelope checks | Ignores cost structure and owner effort; can mislead for low-margin or unstable revenue |
| Asset-based value | Capital-intensive or closing businesses (liquidation scenarios) | Grounded in tangible assets; helpful floor value | Does not capture the value of brand, customer relationships, or systems |
For most side hustles and small online or service businesses where you as the owner are heavily involved, SDE multiples are usually the most relevant starting point.
Assumptions and limitations
- Owner-operator focus. The model assumes a single primary owner actively working in the business. If you have a management team and pay yourself a market-rate salary, an EBITDA-based approach may fit better.
- Stable or gradually changing business. The growth input is a simple one-year adjustment. It does not model detailed multi-year forecasts or changing margins.
- Simple deal structures. The estimate assumes a straightforward asset sale with inventory, key equipment, and agreed debt included. It does not model earn-outs, seller financing, equity rollovers, or complex tax structures.
- Market ranges, not guarantees. Multiples and discounts are based on common micro-acquisition ranges, but actual offers will depend on your specific niche, buyer pool, and market conditions.
- Not legal, tax, or investment advice. Use the result as an educational starting point, then speak with a qualified accountant, business broker, or M&A advisor before signing any sale agreement.
Because of these assumptions, treat the calculator’s output as a negotiation anchor rather than a precise price.
When to use this calculator vs. a professional valuation
This calculator is most appropriate when you are:
- Exploring the idea of selling a side hustle or micro business.
- Comparing scenarios (for example, grow for another year vs. sell now).
- Benchmarking your business against common market multiples.
Consider a formal valuation or professional advice when:
- Business value is a major part of your net worth or retirement plan.
- There are multiple partners, investors, or family members involved.
- You need a value for legal, tax, financing, or regulatory purposes.
Quick FAQ
What is seller’s discretionary earnings? Seller’s discretionary earnings (SDE) is the total financial benefit that a single owner-operator receives from the business in a year, including salary, perks, and profit. It adjusts your financials to show what a hands-on owner can realistically take home.
What multiple do small businesses usually sell for? Many small, owner-operated businesses sell in the 1.5× to 4× SDE range. Recurring revenue, strong documentation, low churn, and diversified customers support higher multiples, while heavy owner dependence or platform risk pull them lower.
How accurate is this valuation for a side hustle? For simple, owner-run businesses with clean books, the calculator can get you into a reasonable range. However, actual offers will vary, and buyers may place more weight on strategic fit, perceived risk, or their own financing constraints.