Valuing Your Business in 5 Minutes or Less

💰Seller's discretionary earnings (SDE) is a key metric used to value a business and represents the cash flow available to the owner.

📈Market multiples can be used as a rule of thumb to determine the value of a business based on its revenue or EBITDA, but industry-specific data is crucial.

🔍Researching recent deals in your industry using databases and professional networks can provide valuable insights into market multiples.

🔢Normalize financial statements to account for one-time expenses, owner benefits, and non-operating costs when calculating SDE.

💼Consider engaging a business broker or appraiser who can provide a more accurate valuation based on their expertise and access to market data.

What is seller's discretionary earnings (SDE)?

—Seller's discretionary earnings is a measure of a business's cash flow that includes the owner's salary, benefits, and other discretionary expenses.

How can market multiples help determine a business's value?

—Market multiples provide a rough estimate of a business's value based on its revenue or EBITDA, but industry-specific data and recent deal analysis are crucial for accuracy.

What factors should be considered when calculating SDE?

—When calculating SDE, it's important to normalize financial statements by adjusting for one-time expenses, owner benefits, and non-operating costs.

Should I engage a professional to value my business?

—Engaging a business broker or appraiser can provide a more accurate valuation based on their expertise, access to market data, and industry knowledge.

Are there any online resources or databases for researching market multiples?

—Yes, there are online databases and professional networks that provide access to market data and recent deals in various industries.

00:00Valuing a business can be done quickly using seller's discretionary earnings (SDE) and market multiples.

04:59SDE is a measure of a business's cash flow that considers the owner's salary and discretionary expenses.

09:05Market multiples provide a rough estimate of a business's value based on its revenue or EBITDA.

10:57Normalizing financial statements is important to accurately calculate SDE by adjusting for one-time expenses and non-operating costs.

13:02Engaging a business broker or appraiser can provide a more accurate valuation based on their expertise and access to market data.