How to value a small business: run the math in five steps.
The same math buyers use to price a small business: profit, add backs, SDE and a multiple. Work it through here or print the worksheet.
Start with net profit from your tax return
Use the number on the return, not the bank balance. SBA lenders typically underwrite from tax returns, so if it is not on the return, a buyer and a lender generally will not count it.
Add back what a new owner would not pay
Only include items you can document and explain in about a minute.
| Add back | Notes |
|---|---|
| One owner's salary and payroll taxes | One owner only, even if two partners work in it |
| Owner's health insurance and benefits | Paid by the business for you |
| Documented personal expenses | Car, phone, meals; labeled in the books |
| Truly one time expenses | A lawsuit, a move, a one time repair |
| Family on payroll above market wage | Their pay minus what a replacement would cost |
| Interest, depreciation, amortization | Financing and non cash items |
Your regular marketing budget is a normal cost of doing business, not an add back.
Seller's discretionary earnings (SDE)
Net profit plus your total add backs equals SDE. SDE is typically used for owner operated businesses.
Larger business with a real management team?
Buyers often use EBITDA instead: SDE minus a market salary for a manager to replace you.
Pick a multiple range
According to BizBuySell, Main Street businesses typically trade between 2x and 4x SDE. Its Q2 2026 Insight Report put the average cash flow multiple at 2.7. Where you land depends on your size, industry, trend and risk.
| Pushes your multiple up | Pushes your multiple down |
|---|---|
| Runs without the owner | Owner does everything |
| Three years of steady growth | Revenue sliding or bouncing around |
| Customers spread out | One customer is a big share of revenue |
| Clean books that match the tax returns | Messy books, cash not reported |
| Written processes, trained team | Everything lives in the owner's head |
| Strong, assignable lease and contracts | Short lease, contracts that can't transfer |
Your rough value range
SDE (or EBITDA) times a low, middle and high multiple gives you a rough range.
Example from the video
$150K profit + $100K owner salary + $20K documented personal expenses = $270K SDE. At 2.5x, that is about $675K. Your multiple may be higher or lower.
The printable worksheet
All five steps on two pages with blanks to fill in. Use your most recent full year, then repeat for the two years before it.
This worksheet gives a rough estimate for education only. It is not an appraisal or a broker's opinion of value, and it is not tax, legal or financial advice.
Thinking about selling?
Even if it is a year or three away, start with a conversation. We will talk through what your business could sell for and what a sale would involve. No cost, no obligation, and it stays confidential.
