Can I verify it with a worked example?

Yes. With annual_revenue = $1,000,000, SDE = $350,000, EBITDA = $280,000 and multiples revenue 2.0×, SDE 3.0×, EBITDA 5.0×: revenue_value = $2,000,000, sde_value = $1,050,000, ebitda_value = $1,400,000, blended range $1.05M – $2.00M with mid ≈ $1.48M.

Methodology: Business Valuation Calculator

Q: What does the Business Valuation Calculator produce?

It produces a directional valuation range from three small-business methods — revenue multiple, SDE multiple (seller's discretionary earnings), and EBITDA multiple — outputting a low / mid / high blend from user-supplied multiples and industry-typical bands.

Q: Is this a formal appraisal?

No. It is an illustrative planning estimate, not a formal appraisal. Regulated transactions — acquisitions, estate planning, equity settlements — require a credentialed appraiser (CVA, ABV, ASA).

1. Scope

The Business Valuation Calculator produces a directional valuation range from three small-business methods: revenue multiple, SDE multiple (seller's discretionary earnings), and EBITDA multiple. It outputs a low / mid / high blend from user-supplied multiples and industry-typical bands. This is an illustrative planning estimate, not a formal appraisal. Regulated transactions — acquisitions, estate planning, equity settlements — require a credentialed appraiser (CVA, ABV, ASA).

2. Inputs and outputs

Inputs: annual revenue, SDE (or owner-earnings proxy for smaller businesses), EBITDA, industry (to seed multiples), and optional growth-rate and margin-quality adjustments. Outputs: revenue-multiple value, SDE-multiple value, EBITDA-multiple value, and a blended low / mid / high range.

Engine source: src/lib/business-valuation-calculator/engine.ts.

3. Formula / scoring logic

# Three methods, user-supplied or industry-seeded multiples
revenue_value   = annual_revenue * revenue_multiple
sde_value       = SDE            * sde_multiple
ebitda_value    = EBITDA         * ebitda_multiple

# Blended range — take the spread across methods
low             = min(revenue_value, sde_value, ebitda_value)
high            = max(revenue_value, sde_value, ebitda_value)
mid             = average(all non-zero inputs)

# Typical micro-SaaS / small-business bands (editorial):
#   revenue_multiple:  0.5x – 3x  (SaaS often 3x–10x at top of cycle)
#   sde_multiple:      1.5x – 4x  (BizBuySell-typical)
#   ebitda_multiple:   3x – 8x    (profitable small businesses)

For SaaS and micro-SaaS, revenue multiples are anchored to public data from Bessemer's Cloud Index and marketplace transaction data from MicroAcquire/Acquire.com (for < $10M ARR).

4. Assumptions

Three-method blend. Revenue-multiple is the simplest and least accurate. SDE-multiple fits owner-operator businesses under $5M revenue. EBITDA-multiple fits growing businesses with normalised management compensation.
Multiples are inputs, not fixed. The tool seeds an industry-typical range; the user is expected to refine based on growth rate, margin profile, customer concentration, and cycle position.
No control / marketability discounts. Minority interests trade at a discount (typically 15–30% for lack of control plus 15–30% for lack of marketability). The tool does not apply these.
Normalisation is the user's responsibility. SDE and EBITDA should be cleaned of one-time charges, owner-above-market compensation, and non-arm's-length transactions before entry.
No DCF. Discounted-cash-flow valuation requires cash-flow projections and a defensible discount rate — out of scope for a ballpark tool.

5. Data sources

Bessemer State of the Cloud 2024 — public-SaaS revenue multiples.
Damodaran — EV/EBITDA multiples by industry (NYU Stern).
BizBuySell Insight Reports — main-street SDE multiples by sector.
Acquire.com (formerly MicroAcquire) — aggregate micro-SaaS transaction data.

6. Known limitations

Not a formal appraisal. For acquisitions, tax, estate, or litigation purposes, you need a credentialed valuation professional (NACVA CVA, AICPA ABV, ASA). The tool is planning-only.
Comparable-company data is noisy for private small businesses. Public multiples reflect liquidity premiums and disclosure quality that private-company comps lack. Apply a 20–40% discount when using public multiples for private-company analogies.
Cycle-sensitivity. SaaS multiples compressed ~50% between 2021 and 2023. A stale multiple anchor can produce a 2× error.
No distressed-business framing. Businesses with declining revenue, customer concentration, or regulatory overhang trade at meaningful discounts the tool does not model.
No deal-structure modelling. Stock vs asset deals, earnouts, seller notes, and non-competes all move effective price meaningfully — handled in LOI/SPA drafting, not here.

7. Reproducibility

Input
annual_revenue = $1,000,000, SDE = $350,000, EBITDA = $280,000. Multiples: revenue = 2.0×, SDE = 3.0×, EBITDA = 5.0×.

Expected output
revenue_value = $2,000,000. sde_value = $1,050,000. ebitda_value = $1,400,000. Blended range: $1.05M – $2.00M, mid ≈ $1.48M. The spread is the story: pick the method your actual buyer pool uses (for main-street acquirers, SDE; for SaaS acquirers, revenue multiple).

8. Change log

2026-04-24methodology page first published. Explicit statement that output is a planning estimate, not a formal appraisal.

Worked example

Run live against the same engine this site ships (/engines/business-valuation-calculator.js). The inputs and outputs below are recomputed on every build and independently re-verified in CI — they are never hand-authored.

Input

tool: business_valuation_calculator
annual_revenue: 500000
revenue_multiple: 1.5
sde: 150000
sde_multiple: 3
ebitda: 120000
ebitda_multiple: 4

Output

methods[0].name: Revenue Multiple
methods[0].description: Valuation based on a multiple of annual revenue. Common for high-growth or pre-profit businesses.
methods[0].range.low: 562500
methods[0].range.mid: 750000
methods[0].range.high: 937500
methods[0].multiple: 1.5
methods[0].baseValue: 500000
methods[1].name: SDE Multiple
methods[1].description: Seller's Discretionary Earnings × multiple. Best for owner-operated businesses under $5M revenue.
methods[1].range.low: 360000
methods[1].range.mid: 450000
methods[1].range.high: 540000
methods[1].multiple: 3
methods[1].baseValue: 150000
methods[2].name: EBITDA Multiple
methods[2].description: Earnings Before Interest, Taxes, Depreciation, Amortization × multiple. Standard for mid-market businesses.
methods[2].range.low: 384000
methods[2].range.mid: 480000
methods[2].range.high: 576000
methods[2].multiple: 4
methods[2].baseValue: 120000
blendedRange.low: 435500
blendedRange.mid: 560000
blendedRange.high: 684500

Frequently asked questions

What does the Business Valuation Calculator produce?: It produces a directional valuation range from three small-business methods — revenue multiple, SDE multiple (seller's discretionary earnings), and EBITDA multiple — outputting a low / mid / high blend from user-supplied multiples and industry-typical bands.
Is this a formal appraisal?: No. It is an illustrative planning estimate, not a formal appraisal. Regulated transactions — acquisitions, estate planning, equity settlements — require a credentialed appraiser (CVA, ABV, ASA).
Can I verify it with a worked example?: Yes. With annual_revenue = $1,000,000, SDE = $350,000, EBITDA = $280,000 and multiples revenue 2.0×, SDE 3.0×, EBITDA 5.0×: revenue_value = $2,000,000, sde_value = $1,050,000, ebitda_value = $1,400,000, blended range $1.05M – $2.00M with mid ≈ $1.48M.