How the calculator works

The figure we start from

The calculator asks for seller’s discretionary earnings, usually called SDE. To work it out, take the pre-tax profit for the last full year and add back one owner’s salary and benefits, interest, depreciation, and any personal or one-time costs a buyer wouldn’t take on. Most small businesses sell as a multiple of SDE, because the buyer usually runs the business and takes that money as pay.

We also ask what it would cost to hire a manager to do your job. We suggest a figure based on the size of the business, and you can change it. Subtracting it from SDE gives EBITDA, the earnings an owner who doesn’t work in the business would keep. We use EBITDA for larger businesses and for the financing check described below.

Industry multiples

Each industry has a low and a high SDE multiple. These bands are our own judgment of where about half of small-business sales land. We set them in October 2026, informed by the mean SDE multiples by industry that BizBuySell publishes for deals closed from the third quarter of 2021 through the second quarter of 2026, and by the middle-half ranges that TradeExitGuide drew from the same data. We plan to review them when new data is published.

We don’t estimate a price for hotels and other lodging. Most of those sales are priced mainly on the property, and the published data mixes the business with the real estate. BizBuySell has no separate category for restoration companies, so that band follows HVAC and other field services and has not been checked against restoration sales.

For accounting firms and insurance agencies, buyers also look at revenue. For those two industries we add a revenue cross-check to the report, at about 1.0 times revenue for accounting and 1.5 times commission revenue for insurance.

Size, and the switch to EBITDA

Smaller businesses sell to fewer buyers and at lower multiples. In the Market Pulse survey for the second quarter of 2026, published by the IBBA and M&A Source, brokers reported deals under $500,000 closing at about 2.0 times SDE on average, deals of $500,000 to $1 million at about 2.8 times, and deals of $1 million to $2 million at about 3.1 times. We follow that pattern. Below about $75,000 of SDE we lower the industry multiple by roughly a quarter. Between about $150,000 and $300,000 we make little or no change, and from $300,000 to $750,000 we raise it gradually by up to 14%.

Larger businesses are usually priced on EBITDA. Market Pulse advisors reported deals of $2 million to $5 million closing at about 4.0 times EBITDA, and deals of $5 million to $50 million at about 5.8 times. We use a band 20% either side of a midpoint that starts at 4.0 times for $1 million of EBITDA and rises to 5.8 times at $3 million. Depending on the industry band, we move that midpoint by up to 10% either way.

Between $500,000 and $1,000,000 of EBITDA, we blend the two methods, moving gradually from SDE to EBITDA. We phase in every adjustment gradually like this, so there are no sudden jumps when earnings or margin rise by a small amount.

Adjustments in the full report

We base the first range on your earnings, your industry, and the size of the business. In the full report, we then adjust it for the following.

• Years in operation. Under three years lowers the range by 14%. Ten years or more raises it by 6%.
• Profit margin. We compare SDE with revenue. We make no adjustment for margins between about 18% and 40%, and raise the range by up to 3% for margins from 40% to 55%. For thinner margins we lower it by up to 20%. We also lower it by up to 10% when the margin is above about 60%, or when SDE is equal to or above revenue, because a buyer will want to verify the figure.
• Optional questions. You can answer up to five more questions. If you skip one, we make no adjustment for it. Together they can lower the range by up to 30% or raise it by up to 12%. We are more willing to lower the range than to raise it, because buyers discount risk more than they reward strength.
  • Could the business run for 30 days without you? Yes: +3%; Mostly: no change; No: −12%.
  • What share of revenue comes from your largest customer? Under 10%: no change; 10–25%: −3%; 25–50%: −10%; Over 50%: −20%.
  • How much of your revenue is recurring or under contract? Under 25%: no change; 25–50%: +2%; Over 50%: +4%. In pest control and managed IT services, the increase is up to 10%.
  • How has revenue changed over the last three years? Growing: +3%; About flat: no change; Declining: −12%.
  • How many recent years of tax returns match your books? Three or more: no change; One or two: −6%; None yet: −15%.

When you answer the optional questions, we also estimate in the report how much the range would change if you improved each answer. We calculate those figures with the same adjustments, so they are as rough as the range itself.

The SBA financing check

Many buyers of small businesses borrow through the SBA 7(a) program, so the price is often limited by what a lender will finance. In the report, we estimate the most a buyer could pay with an SBA loan, using the rules in the SBA’s Standard Operating Procedure 50 10 8.1, which took effect on October 1, 2026.

• The buyer pays themselves or a manager the salary described above, and the rest of SDE is available for loan payments.
• The lender requires that cash flow to cover the loan payments 1.25 times.
• The loan has a 10% interest rate, which is the maximum of prime plus 3% with prime at 7.00%, and a 10-year term.
• The buyer puts down 10%, and the loan can’t exceed $5,000,000.

For the example HVAC company on our homepage, $420,000 of SDE minus a $100,000 salary leaves $320,000. Divided by 1.25, that supports $256,000 a year in loan payments, which would repay a loan of about $1,614,318. With 10% down, the most an SBA-financed buyer could pay is about $1,793,000. When the range goes above that figure, we point it out in the report. A buyer can still pay more, but usually by putting in more cash or borrowing part of the price from the seller. In the Market Pulse survey, sellers received about 84% to 92% of the price in cash at closing, and seller loans made up about 6% to 11%.

How accurate this is

A calculator like this can only be roughly right. In a dissertation at Marshall University, the author compared a single average SDE multiple with the actual sale prices of small businesses in the DealStats database. The median error was about 33%. We use industry bands, size, and adjustments to do better than one average, but the price a buyer actually pays depends on things a calculator can’t check. The most common are how much the business depends on you, how much revenue comes from a few customers, and whether a buyer can verify the earnings.

What the range leaves out

The range is for the operating business on a cash-free, debt-free basis. It leaves out real estate, inventory, working capital, excess cash, and debt, which are usually priced or settled separately. It is a price before taxes and transaction costs, and it doesn’t reflect deal terms such as a seller loan or a payment that depends on future results.

Sources

• BizBuySell, industry valuation multiplesClosed deals, Q3 2021 to Q2 2026
• TradeExitGuide, multiples by industryMiddle-half ranges drawn from BizBuySell data, through Q2 2026
• IBBA and M&A Source, Market Pulse, Q2 2026Survey of business brokers and M&A advisors, Q2 2026
• SBA Standard Operating Procedure 50 10 8.1Effective October 1, 2026
• Marshall University dissertation on microbusiness valuationTested a single average SDE multiple against DealStats sale prices

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