Business Valuation for Digital Businesses

A small digital business is typically worth its Seller's Discretionary Earnings (SDE) multiplied by an industry-specific multiple. In 2026, multiples range from 1.5x for consulting firms to 6.0x for SaaS businesses, depending on business type, growth, recurring revenue, and owner dependency.

Why It Matters

Knowing what your business is worth helps you make critical decisions: whether to sell, what price to negotiate, how much equity to give up, or simply understanding your net worth. Without a valuation framework, owners either undervalue their business (leaving money on the table) or overvalue it (wasting time with buyers who won't pay inflated prices).

Try the calculator

Open Calculator →

How It Works

The calculator uses the SDE method — the standard for owner-operated businesses under ~$5M revenue. First, it calculates your SDE by adding net profit + owner salary + add-backs (one-time expenses, personal perks). Then it applies a multiple based on your business type, adjusted up or down for growth rate, recurring revenue percentage, owner dependency, business age, and customer concentration. The output is a valuation range (low/mid/high), never a single number.

Example

A SaaS product with $180K net profit, $150K owner salary, and $27K in add-backs has an SDE of $357,000. At the software multiple range of 3.0x–6.0x, the business is worth approximately $1.07M–$2.14M. If it has strong retention and 30%+ growth, the adjusted multiple pushes toward the high end.

Resources

Access free SCORE mentoring on business valuation

SCORE, the SBA-backed nonprofit with 10,000+ volunteer business mentors, offers free guidance on when and how to get a business valuation, including workshops on exit planning and valuation methods.

Source: SCORE (SBA Partner)

Explore SDE and EBITDA multiples by industry from Regalis Capital

Regalis Capital's comprehensive guide to small business valuation multiples, including SDE vs EBITDA distinctions, per-industry multiples, and the SBA lending relationship to appraisals. Updated June 2026.

Source: Regalis Capital

Read SBA guidance on closing or selling your business

The U.S. Small Business Administration guide covering how to accurately value your business when preparing to sell, including valuing intangible assets like brand presence, intellectual property, and customer relationships.

Source: U.S. Small Business Administration

Review BizBuySell quarterly transaction data on small business sales

BizBuySell publishes quarterly reports on closed small business transactions including median sale price, median cash flow, and SDE multiples. Q1 2026 showed a median sale price of $350,000 at 2.7x SDE.

Source: BizBuySell

Review SBA guide on buying an existing business

The SBA guide for prospective buyers covering due diligence, valuation considerations, and what to evaluate when purchasing an existing business or franchise.

Source: U.S. Small Business Administration

See Flippa marketplace data on digital business valuation multiples

Flippa publishes transaction-based valuation multiples for SaaS, e-commerce, content sites, apps, and marketplaces. Their 2024-2025 data shows SaaS at 6.13x (top quartile), e-commerce at 3.98x, and content sites at 2.85x profit.

Source: Flippa

Frequently Asked Questions

How can I increase my business's valuation?

The four biggest levers are: grow revenue 15%+ year-over-year (+0.5x–1.0x multiple), increase recurring revenue above 70% (+0.5x–1.5x), reduce owner dependency below 10 hrs/week (+0.3x–1.0x), and diversify your customer base.

Start 12 months before you plan to sell. Clean your financials (monthly accrual close), separate personal and business expenses, document SOPs for everything only you do, build a second revenue channel, and convert project-based revenue to retainers or subscriptions. The difference between 3.0x and 4.5x SDE on $800K is $1.2M in exit value — same business, same year, just better positioning.

How does owner dependency affect business valuation?

High owner dependency is the single biggest value discount. If the business can't operate without you, buyers reduce their offer, require longer earnouts, or walk away entirely.

Ask yourself: if you took 3 months off, what would happen to revenue? If the answer is "it would collapse," you have an owner-dependency problem. The fix: document your processes, delegate client relationships to team members, automate operations, and build systems that work without you. Businesses where the owner works under 10 hours per week get a meaningful multiple premium because buyers see lower transition risk.

Should I use revenue or profit to value my business?

Use profit (SDE) for most small businesses. Revenue multiples are only appropriate for high-growth businesses (25%+ growth) with recurring revenue where profit is intentionally reinvested.

The median small business sold in Q1 2026 had $713K in revenue but only $165K in cash flow — the price was tied to cash flow at 2.7x, not revenue. A high-revenue, low-margin business can be worth less than a smaller business with strong cash flow. Revenue multiples apply mainly to SaaS businesses growing quickly, because recurring contracts make future revenue predictable even when current earnings are low.

What is SDE and how do I calculate it?

SDE (Seller's Discretionary Earnings) is your net profit plus owner salary, benefits, and one-time expenses. It represents the total cash the business puts in the owner's pocket.

The formula is: SDE = Net Profit + Owner Salary + Owner Benefits + One-Time Expenses + Depreciation. For example, a business with $95K net profit, $120K owner salary, $12K health insurance, $6K retirement, and $8K one-time costs has an SDE of $241K. SDE is the standard metric for valuing owner-operated businesses under ~$5M revenue because buyers at this level will operate the business themselves.

What is the difference between SDE and EBITDA?

SDE adds back the owner's salary on top of EBITDA, making it a larger number. Use SDE for owner-operated businesses under ~$5M revenue; use EBITDA for larger, manager-run businesses.

The practical difference: if your SDE is $500K including a $150K owner salary, your EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is only $350K. An SDE multiple of 3x and an EBITDA multiple of 4.3x would give you the same valuation ($1.5M). Never compare SDE multiples to EBITDA multiples directly — they measure different things. Below ~$5M revenue, buyers are individual operators who use SDE. Above that, buyers are private equity firms who use EBITDA and assume they'll hire a manager.

What multiple is my business type worth?

SaaS businesses command the highest multiples (3.0x–6.0x SDE), followed by marketplaces (3.0x–5.0x), e-commerce (2.8x–4.8x), education (2.5x–4.5x), media/content (2.5x–4.0x), agencies (2.1x–3.5x), and consulting (1.5x–2.5x).

Multiples reflect how predictable and transferable the revenue is. SaaS gets the highest multiples because recurring subscription revenue is predictable and doesn't depend on the owner. Consulting gets the lowest because value walks out the door with the founder — clients hire the person, not the firm. Within each range, your specific multiple depends on growth rate, recurring revenue percentage, owner dependency, business age, and customer concentration.

Why do SaaS businesses get higher multiples?

Recurring subscription revenue is more predictable, more transferable, and has higher margins than any other revenue type. Buyers can see exactly what next month looks like from this month's retention data.

SaaS commands 3.0x–6.0x SDE (vs 1.5x–2.5x for consulting) because: 1) Revenue recurs automatically without re-selling, 2) Customer relationships are with the product, not the founder, 3) Gross margins are 70-90%, 4) Low marginal cost per new customer, 5) Retention data gives buyers confidence in future revenue. A SaaS with <5% monthly churn and >100% net revenue retention has nearly guaranteed future earnings — and buyers pay a premium for certainty.