How to Value a Business: SDE, Multiples and Add-Backs

How much is your business actually worth? This breaks down how small businesses are valued, how seller’s discretionary earnings work, which add-backs are legitimate, and what moves your multiple up or down.

What This Video Covers

• How small businesses are valued
• The valuation formula, earnings times a multiple
• What seller’s discretionary earnings (SDE) actually is
• Key add-backs that increase business value
• What determines your multiple
• The value drivers buyers look for
• Common valuation mistakes and myths

The Short Version

Valuation is where most sellers get their first surprise, in one direction or the other. The number a buyer will pay is driven by earnings and by risk, not by revenue or by an industry rule of thumb. Understanding which of your expenses are legitimate add-backs, and which factors make a buyer confident the earnings continue after you leave, is what separates a defensible asking price from a guess.

Go Deeper

Read the full written guide to multiples and SDE, or run your numbers with the free business valuation calculator. If you would rather talk it through, reach out. I am based in St. Augustine and work with business owners across Florida, and the first conversation is confidential and free.