How the valuation calculator actually works.

You enter your business details, answer ten questions, and get a full picture of where your business stands for a potential sale. Here's everything the tool produces:

Every valuation starts with the industry. Different business types trade at different multiples of earnings, and the spread can be enormous. A SaaS company might trade at 4-6x SDE, while a restaurant might trade at 1.5-2.5x.

The calculator covers 104 specific business types organized into 20 industry categories. Users select their industry category first, then their specific business type. Each business type has its own set of multiples, derived from the data sources described above.

For each of the 104 business types, we follow the same process:

1. Start with public company data. We pull the relevant sector multiple from Damodaran (broad sector) and Equidam (granular subcategory).

2. Apply the private company discount. Public companies trade at higher multiples because of liquidity, diversification, and scale. We discount by 40-60% depending on the industry, consistent with the academic literature on private company valuation.

3. Cross-reference with Pepperdine. Pepperdine's private capital markets data tells us what private businesses in similar size ranges actually trade for. We use this to validate our discounted range.

4. Set a range, not a point. Every business type has both a low and high multiple for SDE and revenue. The low end represents a business with operational challenges. The high end represents a well-run, transferable operation. Your assessment answers determine where you land on this range.

The calculator uses two parallel valuation methods:

SDE (Seller's Discretionary Earnings) multiples are the standard for small businesses where the owner is actively involved. SDE represents the total financial benefit to a single owner-operator: net profit plus owner salary, perks, and one-time expenses. Most businesses under $5M in value are priced on SDE.

Revenue multiples serve as a secondary check. Some industries (particularly those with thin margins or high growth) are more commonly valued on revenue. The calculator computes both and uses the SDE-based valuation as the primary output, with the revenue multiple available for context.

A plumbing company in San Jose isn't worth the same as the same company in rural Mississippi. Geography affects both revenue levels and what buyers are willing to pay.

We use the Bureau of Economic Analysis (BEA) Regional Price Parities to calculate geographic modifiers. The formula:

The calculator includes modifiers for approximately 35 major metro areas across the U.S. These are the metros where cost-of-living is large enough to meaningfully affect business valuations. Metros with RPPs close to the national average are excluded because the modifier wouldn't change the result.

If a user selects a state but not a metro area, the tool falls back to a state-level modifier derived from the same BEA dataset.

One critical number in small business valuation is the cost of replacing the owner. SDE includes the owner's salary, but a buyer who isn't going to run the business day-to-day needs to hire a manager. That manager's salary comes directly out of the cash flow.

Each of the 104 business types has a manager salary percentage, representing what percentage of SDE a replacement manager would typically cost. This ranges from roughly 15% for simple operations to 40%+ for complex professional services. The manager salary percentage is used in the SBA bankability calculation, where it directly affects the debt service coverage ratio.

Your position on the valuation range is determined by your weighted assessment score. Here's the formula:

N/A answers are excluded entirely. They don't count for or against you. This means someone who answers 8 questions gets scored on those 8, not penalized for the 2 they skipped.

The range itself comes from your industry's SDE multiples (low and high), adjusted by your geographic modifier. So a pest control company in Austin with 6 Yes answers will land at a different dollar figure than the same answers for a dental practice in New York, because the base ranges and geographic adjustments are different.

As you answer each question, the calculator immediately recalculates your position and moves the marker on the valuation bar. This isn't animation for effect. It's a live recalculation that shows you the relative impact of each answer.

Because the pillars have different weights, you'll notice some answers move the marker more than others. An Owner Dependency question (2.0x weight) moves the marker more than a Business Resilience question (1.0x weight). This visual feedback is intentional. It helps business owners intuitively understand which factors matter most for their valuation.

The likelihood calculation uses the same approach as valuation range positioning, but with the sale likelihood weights instead. This produces a different ranking, because the factors that affect price are different from the factors that kill deals.

The baseline is the Exit Planning Institute's finding that 80% of businesses that go to market fail to sell. Your assessment score adjusts this baseline. A perfect score doesn't guarantee a sale, but it significantly improves the odds.

Each of the 104 business types has a time-to-sell range (in months) based on industry norms. The calculator adjusts this range based on your sale-weighted assessment score:

A business with a poor exit readiness score takes about 40% longer to sell than the industry average. A business with a strong score sells about 20% faster. The modifier uses the sale-weighted score, not the valuation-weighted score, because the factors that slow down a sale are different from the factors that reduce the price.

Most small business acquisitions are financed through SBA 7(a) loans. The SBA requires lenders to verify a minimum Debt Service Coverage Ratio (DSCR) of 1.25x. The calculator checks whether the business meets this threshold:

The 90% loan-to-value ratio reflects SBA 7(a) standards (typically 10% buyer equity injection required). The 10.5% rate reflects current SBA lending rates. The manager salary deduction accounts for the fact that a buyer who won't run the business needs to hire management, which reduces the cash flow available for debt service.

If a business isn't bankable, it doesn't mean it can't sell. It means buyers would need alternative financing (seller financing, conventional loans, investor capital), which narrows the buyer pool and often reduces the final price.

The overall exit readiness score is the raw (unweighted) sum of all assessment answers, presented as X out of 10. Each pillar shows its own score out of 2. This is the unweighted score, not the weighted one, because showing weighted percentages to users is confusing and doesn't help them understand what to work on.

The weighted scores do their work behind the scenes: they position you on the valuation range and calculate your likelihood of selling. The raw scores are what you see in the results, because they're actionable. "You scored 0/2 on Financial Clarity" is clear. "Your weighted Financial Clarity contribution was 0 out of a possible 3.5 normalized to 47.2%" is not.

I believe in being honest about what I do and don't do. The calculator is built around five pillars, but I only work on two of them.

When your weakest pillar falls outside my area, the calculator recommends the right type of professional and (when available) connects you directly with a vetted partner. This isn't an upsell. A business owner whose biggest problem is messy financials needs a CPA, not a Fractional COO.

The referral system tracks which recommendations are made and whether users follow through (via GA4 analytics), so we can measure whether the tool is actually connecting people with the help they need.

Every source referenced in the valuation model, assessment framework, and this methodology document.