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You can get a rough planning estimate in five minutes if you have reliable financial figures—but it is not a formal appraisal or a promise of what a buyer will pay. A quick calculation depends on its earnings assumptions, add-backs, comparison data, and purpose. Treat the result as a starting range, then use a qualified valuation professional when a sale, financing, legal, or tax decision depends on the number.
How to make a five-minute estimate
A simple market-method illustration starts with seller’s discretionary earnings (SDE): an estimate of the earnings available to one working owner, after adding back certain owner compensation and documented expenses that a buyer would not necessarily incur.
- Start with net profit. Use a clearly identified period and financial records, rather than a rough recollection.
- Add back owner compensation and eligible expenses. Include only items you can document and reasonably justify. An expense is not automatically an add-back just because the owner paid it.
- Apply a relevant market multiple. The multiple should come from comparable businesses or transactions that fit the business’s sector, size, geography, timing, and deal structure. A generic multiple may produce misleading precision.
For illustration, a 2020 Forbes Councils/YEC article calculated $100,000 net profit + $50,000 owner salary + $50,000 in other claimed add-backs = $200,000 SDE. It then multiplied $200,000 by 2.28 for an illustrative value of $456,000. The article attributed 2.28 to BizBuySell data, but the passage does not identify the underlying transaction period or explain how broadly the figure applies. It is historical context for the example, not a current benchmark or a reliable estimate for your business. Forbes Councils/YEC’s 2020 example
Which valuation approach fits the question?
There is more than one way to estimate a business’s value. The SBA identifies income, market, and asset-based approaches; IRS guidance says an appraiser selects the approach or approaches and methods that best indicate value for the assignment.
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| Approach | What it considers | Useful question to ask |
|---|---|---|
| Asset-based | Business assets and liabilities. | What remains after accounting for liabilities, and does this capture the value of an operating business? |
| Income | Expected economic benefits or earning potential, with assumptions appropriate to the method and risk. | What earnings or benefit stream is being valued, and what assumptions account for risk and future performance? |
| Market | Comparable businesses or transactions. | How closely do the comparisons match this business in sector, size, location, timing, and deal structure? |
An asset calculation can be a useful lens when assets drive value or when an income-producing going concern is not the right premise. But simply totaling tangible assets may miss goodwill and the value of an established operation. The IRS defines going-concern value as additional value attached to property because it is integral to an ongoing business that can continue to function and generate income after a change in ownership. It describes goodwill as value tied to expected continued customer patronage because of the business’s name, reputation, or another factor. IRS Publication 551
Why the estimate can move
A valuation is shaped by more than one year’s profit or an industry label. IRS guidance directs appraisers to consider the business’s nature and history, economic and industry outlook, financial condition and earning capacity, goodwill and other intangible assets, comparable interests, and other relevant information. Business risk, industry conditions, and the stability or irregularity of earnings can also affect the assumptions used in an income approach. IRS Business Valuation Guidelines
Trustmark M&A says its calculator uses adjusted earnings and sector multiples, with potential adjustments for customer concentration, management depth, growth trends, and financial-record quality. Those are factors the provider says it considers, not independently verified claims about the calculator’s accuracy. Trustmark M&A’s calculator and stated methodology
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- Customer concentration: Reliance on a small number of customers can affect how a buyer assesses risk.
- Earnings quality: Irregular earnings, weak records, or unsupported add-backs make the inputs less dependable.
- Future prospects: Growth trends and the economic and industry outlook can affect expectations of future income.
- Intangibles and comparables: Goodwill may matter, while market comparisons are only useful to the extent they resemble the business being valued.
What “worth” means in a valuation
Value is not a single number independent of purpose. The IRS defines fair market value as “the price at which property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts.” The estimate should make clear what value standard and purpose it addresses; an exploratory planning figure is not automatically suitable for a transaction, financing application, or filing. IRS Publication 551
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When comparing two estimates, check what earnings measure each uses, which add-backs have records, what comparable sales support a multiple, and what each assumes about risk, goodwill, owner dependence, customer concentration, and future income. Also check whether the output is a planning range, a broker opinion, or a formal valuation prepared for a specified use.
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A calculator can help organize an early planning conversation. Trustmark M&A says its free calculator takes about five minutes and works by identifying adjusted earnings, applying industry multiples based on similar sales, and fine-tuning for business characteristics. The provider characterizes its result as a planning estimate, not an appraisal or formal opinion of value, and says not to rely on it for a transaction, financing application, or legal or tax filing. This is the provider’s description of its own tool, not independent validation. Trustmark M&A’s calculator
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The SBA recommends valuing a business before marketing it for sale. If you are preparing to sell, applying for financing, or making a legal or tax decision, seek advice appropriate to that use and support the valuation with relevant records and evidence. SBA guidance on selling a business
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