6 Expert Guides
Business Valuation Guides
Everything a business owner needs to understand about valuation covering the fundamentals of SDE and EBITDA, advanced topics like valuation multiples, deal structure, and pre-sale value optimization. Each guide is written for operators and entrepreneurs, not academics, and includes the formulas, benchmarks, and practical context that matter when real money is on the line.
Select a guide below to start learning, or try our free valuation calculator to apply these concepts to your own business financials.
The Complete Guide to Business Valuation
Business valuation is the process of determining the economic worth of a company using income-based, market-based, or asset-based approaches.
SDE vs EBITDA: Which Metric to Use for Business Valuation
SDE (seller's discretionary earnings) includes the owner's full compensation as an add-back, making it the standard earnings metric for owner-operated businesses under $5 million in revenue.
Business Valuation Multiples Explained
A business valuation multiple is a ratio that converts an earnings metric or revenue figure into an estimated business value.
How to Sell a Small Business: Step-by-Step
Selling a small business involves six key phases: obtaining an accurate valuation, preparing the business for sale by improving financials and reducing owner dependency, confidentially marketing the business through brokers or direct channels, negotiating price and deal structure, surviving buyer due diligence, and closing the transaction.
5 Business Valuation Methods Every Owner Should Know
The five most common business valuation methods are the SDE multiple method (best for owner-operated small businesses), the EBITDA multiple method (best for mid-market companies), the discounted cash flow method (best for high-growth businesses), the revenue multiple method (useful for unprofitable or high-growth companies), and the asset-based method (best for asset-heavy or liquidation scenarios).
How to Increase Your Business Value Before Selling
Business owners can increase their company's value before selling by focusing on five key value drivers: growing and diversifying revenue, improving profit margins and SDE, reducing owner dependency through systems and management depth, building recurring or contractual revenue streams, and maintaining clean financial documentation.
From Knowledge to Action
These guides cover the concepts, formulas, and frameworks behind business valuation. When you are ready to apply them to your own company, run a valuation with your numbers using SDE, EBITDA, and revenue multiples calibrated to your specific industry to produce a data-backed estimate in under five minutes.
Need to understand a specific term? Our valuation glossary defines 30+ concepts with formulas and examples. For context on why you need a valuation in the first place, see our valuation use cases.
Frequently Asked Questions
How do you value a small business?
The most reliable approach uses three methods in parallel: multiply seller's discretionary earnings (SDE) by an industry-specific multiple, multiply EBITDA by a separate industry multiple, and apply a revenue multiple as a cross-check. Weighting these three estimates produces a defensible valuation range. Most small businesses with under $5 million in revenue are valued primarily on SDE multiples.
Can I do my own business valuation?
Yes. A DIY valuation using an online calculator is appropriate for informal estimates, internal planning, and preliminary conversations with buyers or partners. It is not sufficient for IRS filings, divorce proceedings, SBA loans, ESOPs, or litigation, which require a report from a credentialed appraiser (ABV, CVA, or ASA). Many owners run a free estimate first to establish a baseline, then hire a professional to refine it.
How much does a professional business valuation cost?
A professional business valuation typically costs $2,000 to $50,000 depending on complexity and purpose. A rough calculation engagement runs $2,000 to $5,000, a summary report costs $5,000 to $15,000, and a comprehensive valuation for litigation or regulatory purposes costs $15,000 to $50,000 or more. The cost depends on business complexity, the number of entities, and whether financial records are organized.
What is the most common method for valuing a small business?
The SDE multiple method is the most common approach for small businesses. It multiplies seller's discretionary earnings by a factor derived from comparable transactions in the same industry. SDE multiples typically range from 1x to 4x for most small businesses, with the specific multiple depending on industry, size, growth rate, and risk profile. Larger businesses with hired management use EBITDA multiples instead.
What information do I need for a business valuation?
At minimum, you need three years of tax returns or profit-and-loss statements, a current balance sheet, details of owner compensation and personal expenses run through the business, a list of assets and liabilities, and information about your customer concentration and revenue trends. For a more precise valuation, include lease terms, employee details, and any contracts or recurring revenue agreements.
Ready to Value Your Business?
Our free calculator applies the same methods covered in these guides (SDE multiples, EBITDA multiples, revenue multiples, and DCF) to your actual financials. Get an instant valuation range in under five minutes.
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