Small business valuation
- Business value with inventory
- $486,000
- Value of the earnings
- $450,000
- Price per dollar of earnings, all in
- 2.7
Every figure on this page is computed from the inputs you enter, by the method stated below it, including the multiple, which is yours. MultiplesBook publishes no multiples, no comps and no survey: the defaults are a worked example to replace with your own.
The figures above start from a worked example ($486,000). Change any input and the answer updates as you type.
Download the Small business valuation worked example (CSV)
This values a small business the way a broker and a buyer both do it. Seller's discretionary earnings from the last twelve months times the multiple you enter is the value of the earnings; inventory at cost sold with the business goes on as its own line; and the total divided by the earnings is the price per dollar of earnings the buyer will quote back. The multiple is yours; the tool publishes none. Free, on the page, no account; the paid plan saves the valuation against the business.
Seller's discretionary earnings, from the books
The earnings a small business is valued on are the net profit plus the owner's salary, benefits and one-off costs added back, because the buyer will run it without those. Work the figure from the last twelve months of books rather than a projection, and enter it; a valuation on projected earnings is a valuation of a promise.
Times your multiple, and the multiple is the argument
The value of the earnings is the earnings times the multiple, and the multiple is where every valuation conversation is actually held. It comes from comparable sales in the trade, a broker who closes deals in it, or the buyer's own offer. The tool asks for it rather than printing one, because a multiple on a website is a guess about a trade and a town nobody has seen.
Inventory added, not multiplied, and the price per dollar
Inventory sold with the business is added at cost on its own line, because a buyer pays for stock rather than a multiple of stock. The total divided by the earnings is the all-in price per dollar of earnings, which is the figure the buyer will quote when they say the price is high, and the figure that tells you whether the inventory is doing the work.
Small business valuation: common questions
Is this a free small business valuation calculator?
Yes. Enter the seller's discretionary earnings, your multiple and the inventory sold with the business, and it values the business on the page with the price per dollar of earnings, no account and no card. MultiplesBook Pro saves the valuation against the business and keeps the multiple and the earnings for next time.
What multiple should I use?
The one you can defend: from comparable sales in your trade, a broker who has closed deals in it, or the buyer's offer. The worked example uses 2.5 to show the arithmetic and nothing more. The tool publishes no multiple, because the right one depends on the trade, the size, the year and the buyer.
How do I work out seller's discretionary earnings?
Start from the net profit in the books, add back the owner's salary and benefits, interest, depreciation and any one-off costs that will not recur, and take off anything the owner was paid that the buyer will have to pay someone else. The result is what the business throws off for one owner-operator, which is what the multiple is applied to.