Calculator Inputs
Enter annual figures. Use realistic multiples from comparable businesses or broker benchmarks.
Example Data Table
| Input Item | Example Value | Why It Matters |
|---|---|---|
| Annual Revenue | $250,000 | Top-line sales show market demand. |
| Cost of Goods Sold | $60,000 | Direct delivery costs affect margins. |
| Operating Expenses | $90,000 | Core overhead reduces operating profit. |
| Owner Salary and Benefits | $58,000 | Added back for SDE-based buyer review. |
| One-Time Expenses | $7,000 | Helps normalize future performance. |
| Total Assets Less Liabilities | $90,000 | Creates a balance-sheet valuation floor. |
Formula Used
1. EBITDA
EBITDA = Annual Revenue − Cost of Goods Sold − Operating Expenses
2. Normalized Profit
Normalized Profit = EBITDA + One-Time Expenses + Non-Operating Income
3. Seller Discretionary Earnings
SDE = Normalized Profit + Owner Salary + Owner Benefits
4. Earnings Method
Earnings Value = Normalized Profit × EBITDA Multiple
5. SDE Method
SDE Value = Seller Discretionary Earnings × SDE Multiple
6. Net Asset Method
Net Asset Value = Total Assets − Total Liabilities
7. Discounted Cash Flow Method
DCF Value = Present Value of Forecast Cash Flows + Present Value of Terminal Value
The recommended estimate uses a weighted blend of active methods. SDE carries the highest weight because owner involvement often matters most in small freelance businesses.
How to Use This Calculator
Enter your yearly revenue and direct service costs first.
Add operating expenses, owner salary, and owner benefits next.
Include unusual one-time expenses to normalize performance.
Enter assets and liabilities for balance-sheet support.
Choose realistic EBITDA and SDE multiples from market research.
Set growth, discount, and terminal rates conservatively.
Submit the form to view the value range.
Compare methods before setting a sale or asking price.
Frequently Asked Questions
1. What is the best method for valuing a small business?
No single method fits every case. Service businesses often rely on SDE or earnings multiples. Asset-heavy firms may depend more on net asset value. Comparing several methods usually gives a stronger estimate.
2. Why does owner salary get added back?
Small business buyers often review total owner benefit, not just accounting profit. Adding owner salary and benefits back helps estimate what a new owner could take from the business.
3. What is a normal SDE multiple?
It varies by industry, risk, client concentration, and growth quality. Many small service businesses sell within modest multiple ranges, but better systems and recurring revenue can support stronger pricing.
4. Why is discounted cash flow included?
DCF captures future earning potential. It is useful when growth matters and historical profit alone does not explain the business story. It also shows how risk affects present value.
5. Should I use gross revenue alone to price my business?
Revenue alone is not enough. Buyers care more about profit quality, owner dependence, contract stability, and operating risk. Strong revenue with weak margins may still produce a lower value.
6. What lowers a freelance business valuation?
Client concentration, unstable cash flow, heavy owner dependence, weak records, large liabilities, and declining margins often reduce value. Risk makes buyers demand lower multiples or wider negotiation ranges.
7. Can I use this calculator before selling?
Yes. It helps you estimate value before listing, negotiating, or planning an exit. It also highlights which financial drivers need improvement before you approach buyers.
8. Is this calculator a substitute for a formal valuation?
No. It gives a practical estimate, not a certified opinion. Formal valuations may require tax records, contract review, market comparisons, and expert judgment for legal or financing purposes.