How the valuation tool works

The valuation tool gives an indicative value range for a business from a few key numbers. It is built to be transparent and repeatable: every step is shown, and the same answers always give the same result. It is not a formal valuation or financial advice, and final sale prices usually land below asking prices.

Every calculation is stored with its answers, the engine version and the benchmark set version, so any saved result can be reproduced exactly. When the benchmark set changes, saved valuations keep their original result and can be recalculated as a new valuation.

Seller's discretionary earnings (SDE) are net profit before tax, plus the salary and benefits of one full-time working owner, plus interest, depreciation and amortisation, plus one-off or discretionary costs a new owner would not carry. Only costs that can be evidenced should be added back.

Adjusted EBITDA is SDE minus the market salary to replace the owner's role. If SDE is zero or negative, the tool does not produce an earnings-based value. It explains why and shows an average revenue multiple for context only, never as a value for the business.

SaaS businesses with annual recurring revenue are valued on an ARR multiple, cross-checked against an SDE multiple for owner-operated software. Any other business is valued on adjusted EBITDA when adjusted EBITDA reaches $500,000 or SDE exceeds $750,000 (US dollar equivalents). If the market salary for the owner's role is needed and missing, the tool asks for it rather than guessing. Everything else is valued on SDE.

A revenue multiple is worked out for every business as a sanity check only. Figures in other currencies are converted to US dollars with the European Central Bank reference rate stored on the day of the calculation, and that rate is saved with the result.

The tool looks up low, likely and high multiples by model group, basis and size band. Size decides the band first. Above the top band of any basis, the top row is used with a clear warning that the business is outside this tool's range, and a formal valuation is recommended.

“Main street and services” covers every model without its own rows, including agencies, trades, retail, hospitality, healthcare practices, manufacturing, distribution and logistics. These figures are starting points, reviewed quarterly against the primary reports. Some reached us through secondary summaries or are based partly on asking prices; the source line says so where that applies.

The multiples are multiplied by a factor for the business's region. Until a factor is calibrated against a named source, it stays at 1.000 and results outside the US carry a note that the benchmarks lean on US and online marketplace data.

Answers about quality and risk move the multiples up or down. The adjustments are added together and the total is kept between -45% and +30%, then applied to the low, likely and high multiples alike. The upside cap is smaller because the size bands already price in size.

SaaS annual growth replaces the general revenue trend rule. Where a model-specific rule measures the same risk as a general one, such as ecommerce channel share and platform dependence, only the larger adjustment counts. A manager running the business day to day counts only on the SDE basis, because an adjusted EBITDA figure already pays for that manager. Every rule that matched is listed in the result, including the ones that did not count and why.

The basis figure is multiplied by each adjusted multiple and rounded to two significant figures. Inventory at cost, if entered, is shown as an addition to the range rather than blended into it. The asking price, if entered, is marked on the scale as below, within or above the range.

Confidence is high, medium or low. It depends on how complete the answers are, the quality of the financial records, years trading and known legal, tax or compliance issues. Significant known issues always mean low confidence. Low confidence widens the range by 10% either side. The reasons are listed with every result.

The result flags an implied revenue multiple above 2.0x for businesses other than software, a profit margin above 50% outside software and content, and a basis figure above the tool's top band, where a formal valuation is recommended.

The scale can show the median asking multiple of live listings in our feed that share the business's model group, size band and region, measured on the same basis. These are asking prices, not sale prices. The median is shown only when at least 3 listings match, with the count beside it.

In buyer mode the tool tests whether the business could carry its purchase debt. The starting terms are a 10% deposit, 10% seller finance, a loan at 9% over 10 years, and a debt service coverage threshold of 1.25x. They are starting points, not market rates: change them to match your financing. Coverage is earnings after a market salary for the owner's role divided by annual debt service. Simple payback is the price divided by those earnings.

• The result is only as good as the figures entered. Listed figures come from sellers and are unchecked.
• Most benchmark data comes from US deals and online marketplaces. Other regions may price differently.
• Multiples describe typical deals. They cannot see property, working capital, debt, tax structure or deal terms.
• Comparable listings show what sellers ask, not what buyers pay.
• Quality answers are plain multiple choice and cannot capture everything a due diligence review would find.

Get a formal valuation from a qualified adviser before you make or accept an offer, raise finance, settle a dispute, divide a business between owners or report a value for tax. You should also get one when the business is above the tool's top band, when confidence is low, or when the figures depend on add-backs you cannot evidence.

Anonymous calculations are stored without personal data and used in aggregate to review the benchmarks, as our privacy policy explains.