Business Valuation Calculator

Because no single method is authoritative for a small business sale -- Average Valuation blends the SDE Multiple, Revenue Multiple, and DCF results with equal weight. If the DCF Valuation is much higher than the other two (which happens whenever growth rate is high relative to discount rate), it will pull the average upward even though multiple-based methods are usually considered more reliable for small deals.

SDE is net income plus owner salary, benefits, personal expenses run through the business, and other one-time or non-operating add-backs -- essentially the total financial benefit available to a single owner-operator. It's the standard earnings figure used for small business sales, distinct from EBITDA, which doesn't add back owner compensation.

Quite sensitive -- raising the discount rate lowers the DCF Valuation, since future cash flows and the terminal value are both discounted more heavily back to the present. Because the terminal value formula divides by the gap between discount rate and growth rate, a discount rate set close to your growth rate produces an unusually large valuation, so the two should reflect a realistic risk premium apart.

They measure different things: the Revenue Multiple Valuation ignores profitability entirely and just scales top-line revenue, while the SDE Multiple Valuation is anchored to actual owner earnings. A business with high revenue but thin margins can show a much higher revenue-based valuation than its SDE-based one -- a mismatch worth investigating rather than averaging away.

Yes -- a higher Expected Growth Rate increases the projected cash flow in every future year and raises the terminal value, so DCF Valuation increases as growth rate rises, holding discount rate and SDE fixed. This makes the DCF figure the most assumption-driven of the three valuation methods, since a small change in growth rate can move it substantially.