The 3 Methods That Determine Business Value
Valuation is not a single calculation — it's the intersection of three methods, each of which produces a different number. Understanding all three gives you the full picture that investors and buyers use.
Method 1: Revenue Multiple
Simple and fast: Value = Annual Revenue × Revenue Multiple. Most commonly used for high-growth startups where profitability is secondary to growth rate. 2026 SaaS revenue multiples range from 2x–15x depending on growth rate and churn.
Method 2: EBITDA Multiple
More accurate for profitable businesses: Value = EBITDA × Industry Multiple. EBITDA multiples for small businesses range from 2x–6x. For larger, established companies: 6x–15x. For top-tier SaaS: 15x–40x+.
Method 3: Seller's Discretionary Earnings (SDE)
Most relevant for owner-operated businesses. SDE = Net profit + owner's salary + owner's benefits + non-recurring expenses. SDE multiples for small businesses typically range from 2x–4x annual SDE.
Use the Business Valuation Calculator to calculate your value under all three methods simultaneously.
2026 Valuation Multiples by Business Type
- SaaS (high growth, >50% YoY): 8–15x ARR
- SaaS (stable, 20–50% YoY): 4–8x ARR
- Digital agency: 2–4x SDE or 0.8–1.5x revenue
- E-Commerce (Shopify): 2–4x annual net profit (SDE)
- Content/media business: 2–5x net profit
- Service business: 2–3x SDE
What Increases Business Valuation
- Recurring revenue (vs one-time)
- Low customer concentration (no single customer >20% of revenue)
- Low churn rate
- Strong gross margins (>70% for SaaS)
- Documented processes (business runs without the founder)
- Proprietary technology or data moats
Calculate your current valuation with the Business Valuation Calculator, then model how each improvement affects your multiple. Cross-reference with the Customer Lifetime Value Calculator to understand how improving LTV raises your revenue multiple.