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Business Valuation Calculator

Estimate what a business is worth

Result

$450,000.00

How it is calculated

Value = annual earnings × multiple. Earnings is the yearly profit figure you choose to value, and the multiple is the number of years of that profit a buyer is assumed to pay. The tool does a single multiplication and shows the result in dollars with two decimals.

The multiple cannot be negative. Earnings can be entered as a negative number and the tool will return a negative value, so check the sign. The answer is only as good as the earnings definition behind it (net profit, seller's discretionary earnings, EBITDA) and the multiple, which should come from comparable sales in the same industry. No debt, cash, growth or risk adjustments are made.

Worked example

A small business earns 150,000 a year after the owner's pay has been accounted for, and similar businesses in its field are assumed to sell at 3 times earnings. Value = 150,000 × 3 = $450,000.00. With a multiple of 2.5 the same business would be worth 375,000, so the choice of multiple drives the answer.

Try this example →

Common mistakes

  • Applying a multiple meant for EBITDA to net profit (or the reverse): multiples are only comparable when the earnings definition is the same.
  • Forgetting to add back or deduct the owner's pay: a business that looks profitable before the owner's salary may earn little after it.
  • Using last year's one-off peak or loss as the earnings: the multiple assumes a representative yearly figure.
  • Treating the result as the price you will receive: the tool ignores debt, inventory, cash and negotiation, so it is a first-pass estimate.

Sources

About this calculator

This calculator applies the simplest form of the earnings multiple method: business value = annual earnings × a chosen multiple, where the multiple reflects what buyers in that industry typically pay for a dollar of profit (often 2-4x for small owner-operated businesses, higher for scalable, recurring-revenue companies).

Business brokers and small-business buyers use quick multiple-based estimates like this as a first-pass sanity check before commissioning a full valuation — it's fast precisely because it skips discounted cash flow projections and asset appraisals, trading precision for a ballpark figure you can get in seconds.

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Comments (1)

  • Editorial team

    Since the multiple is the shakiest input, it helps to run the tool twice, once with a low multiple and once with a high one, and treat the two outputs as a negotiating band rather than a single price. With 250,000 in yearly earnings, multiples of 3 and 5 give 750,000 and 1,250,000. Debt is not deducted, so what an owner actually keeps can differ. Which earnings definition do you work with?

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