Small Business Valuation Calculator: Revenue, EBITDA & DCF
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Three valuation methods, side by side, so you see where they agree — and where they don't. Revenue multiple, EBITDA/SDE multiple, and a full discounted cash flow. Math runs locally.
Three numbers that can disagree
With the defaults ($500K revenue at 1.0x, $120K EBITDA at 3.5x, 5% growth and a 20% discount rate), the same business prices at $500K by revenue multiple, $420K by EBITDA multiple and $758K by DCF, a 68% spread. All three can be “right” at once, because they’re answering slightly different questions. The revenue multiple asks “what did similar top-line businesses sell for?” and ignores margin entirely. The EBITDA (or SDE) multiple asks the same question but anchors on profit, which is why brokers and SBA lenders lean on it for small, owner-operated businesses. The DCF asks something different again: “what is this specific business’s own projected cash flow worth today?” — it doesn’t care what anyone else sold for.
When the three land close together, that’s a useful signal of confidence. When they’re far apart — a wide “method spread” — it usually means the multiples you picked don’t match this business’s actual growth and risk profile, or that the DCF assumptions are doing too much work. Either way, showing the range beats collapsing to one number and pretending it’s precise. One common cause of a DCF far above the multiples: small-business cash flow is usually seller’s discretionary earnings, which still includes the owner’s own pay. Small businesses sell for 2.7x cash flow; a 20% DCF says 5.3x works through how much that one adjustment closes the gap.
How the math works
- Revenue multiple = annual revenue × the multiple you set.
- EBITDA/SDE multiple = annual EBITDA × the multiple you set.
- DCF = sum of each projected year’s EBITDA (grown at your growth rate), discounted back at your discount rate — plus a terminal value (Gordon Growth perpetuity: terminal cash flow ÷ (discount rate − terminal growth rate)), also discounted back to today.
- Spread = (highest − lowest) ÷ median, across the three methods.
Discount rates for small businesses are conventionally much higher than public-market discount rates (often 15-25%+) because losing a single owner-operator, key employee, or customer can be existential in a way it isn’t for a diversified public company. Source: standard business appraisal methodology (market approach: revenue/EBITDA multiples; income approach: DCF with the Gordon Growth terminal value formula), consistent with the framing in the SBA’s guidance on business valuation for loan purposes.
Math runs locally. Inputs never leave your browser. Source on github.
Where this doesn’t apply
- Pre-revenue or early-stage startups. With little or no revenue and negative EBITDA, multiples and DCF both break down — early-stage valuation runs on comparable funding rounds and milestones, not this framework.
- You haven’t normalized EBITDA. Real appraisals add back one-time expenses, above-market owner salary, and personal expenses run through the business. Skipping that step understates EBITDA and every method built on it.
- Asset-heavy businesses. A business whose value is mostly in real estate, equipment, or inventory is often better priced by net asset value than by earnings multiples — this tool doesn’t model that approach.
- You’re negotiating a real deal. Buyers run quality-of-earnings diligence, negotiate working-capital adjustments, and price control premiums or minority discounts — none of which a single calculator can see.
What to actually do
- Pull trailing-twelve-months revenue and EBITDA from actual financials, not projections.
- Normalize EBITDA: add back owner salary above market rate, one-time expenses, and personal items run through the business.
- Find 3-5 comparable recent sales in your industry and region for the revenue and EBITDA multiples — a broker or industry association report beats a guess.
- If the three methods land close together, treat the median as a credible starting point. If the spread is wide, figure out why before quoting a number to anyone.
- For an actual sale, purchase, or loan, get a certified business appraiser or broker opinion of value — this tool is for understanding the drivers, not for the closing table.