How do I calculate the value of my small business?
Four steps: normalise the earnings, pick the right earnings figure, apply a size-appropriate multiple, then adjust for debt and cash. Worked example included.
Take your normalised annual earnings, multiply by a figure appropriate to your size and risk, then adjust for debt and surplus cash. The arithmetic is trivial. Choosing the right earnings figure is where small businesses go wrong.
The four steps, worked
- 1. Reported operating profit
- €142,000
- as it appears in the accounts
- 2. Normalised SDE
- €268,000
- + owner €98k, + vehicle €12k, + one-offs €16k
- 3. At 2.75× SDE
- €737,000
- enterprise value
Then step four: deduct debt and add cash above what the business needs to operate. With €90,000 of loans outstanding, what actually reaches you is around €647,000 — before fees and before tax.
The mistake that costs the most
The figure above is SDE — it still contains the owner's salary. SDE multiples run roughly 2 to 3.5×. If you take that same €268,000 and apply an EBITDA multiple of 5×, you get €1.34M for a business that will transact near €740,000.
That single confusion is the most expensive error in small business valuation, and it is entirely avoidable. SDE vs EBITDA explains which figure applies to you.
Where to find your multiple
Sector averages are a starting point, not an answer — most published figures come from businesses several times larger than an owner-managed company. Confirm the size band before you use any comparable, and if you cannot find the band, do not use the number. How to value a business covers finding a defensible multiple.