Start with EBITDA
Most established buyers anchor on EBITDA — earnings before interest, tax, depreciation and amortization. It's a proxy for the cash a business throws off, before financing and accounting choices blur the picture.
For owner-operated businesses below ~$1M EBITDA, buyers often look at SDE (seller's discretionary earnings) instead. Above that, EBITDA is the convention.
Normalize earnings
Reported EBITDA almost never matches the number a buyer will use. We adjust for items a new owner wouldn't carry, and for one-time events that don't reflect ongoing operations.
Common add-backs
- Owner compensation in excess of a market-rate replacement
- One-time legal, consulting, or restructuring costs
- Discretionary expenses (vehicles, travel, family on payroll)
- Non-recurring revenue or expenses
Common deductions
- Below-market rent paid to a related party
- Capitalized expenses a buyer would treat as opex
- Customer concentration penalties
- Deferred maintenance or capex catch-up
The calculator captures the most common of these. A quality-of-earnings exercise during a real transaction goes much deeper — this is a directional starting point.
Apply an industry multiple
Each industry has a typical multiple range. It reflects how cyclical the sector is, how capital-intensive the business model is, and how active the buyer pool is.
We use a current, market-informed range per industry — refreshed against transaction data so the bands don't drift. Our industries page shows the typical range for each sector we cover.
Adjust for scale & quality
Two businesses with the same EBITDA in the same industry can trade at very different multiples. The factors that move you within the range — or sometimes outside it — are well understood.
Moves you up the range
- Larger absolute EBITDA (scale premium)
- Multi-year revenue and margin growth
- Diversified customer base, recurring revenue
- Management depth beyond the owner
- Clean financials, audited or reviewed statements
Moves you down the range
- Customer or supplier concentration
- Heavy dependence on the owner's relationships
- Inconsistent or declining earnings
- Capex catch-up or aging assets
- Regulatory or contract-renewal risk
Show a range, not a number
A real offer is shaped by the specific buyer, the deal structure (cash vs. earn-out vs. roll-over equity), and what diligence finds. A single point estimate would mislead. The calculator returns the band you should expect — with a midpoint as a useful anchor.
Always shown together. If you ever see a single-number estimate from the calculator, it's a bug.
What this estimate isn't
- It is not a formal appraisal.
- It does not create an advisory or fiduciary relationship.
- It should not be relied on for transaction pricing or estate planning.
- It is a starting point for an informed conversation — nothing more.