Compare the asking price with your valuation assumptions.
Choose one valuation method and its assumptions. Review the resulting point estimate or range, then compare the asking price with the base estimate.
Formula reference
| Metric | Formula | What it means |
|---|---|---|
| SDE multiple | Annual seller's discretionary earnings x selected SDE multiple | Uses an explicitly supplied SDE amount for a business purchase. SDE may include one owner's compensation and benefits. |
| EBITDA multiple | Annual EBITDA x selected EBITDA multiple | Uses earnings before interest, taxes, depreciation and amortization, with the selected seller-reported, buyer-adjusted or calculated source. |
| Revenue cross-check | Annual revenue x selected revenue multiple | Uses business revenue as a cross-check. Revenue alone does not show profitability. |
| Direct capitalization | Annual net operating income / selected capitalization rate | Uses property income after operating expenses and before financing. Enter the rate as a percentage; 8% means 0.08 in the formula. |
| GRM cross-check | Annual gross rent x selected Gross Rent Multiplier | Uses property gross rent and ignores operating expenses. GRM is a multiple, such as 8x, not a percentage. |
Calculation
Assume buyer-adjusted annual EBITDA of $100,000 and select the EBITDA multiple method. Use low, base and high multiples of 3.5x, 4.0x and 4.5x. These fictional assumptions illustrate the calculation; they are not market reference multiples.
The low, base and high estimates are $350,000, $400,000 and $450,000. An asking price of $425,000 is $25,000, or 6.25%, above the base estimate while still inside the range.
One method, a clear base for comparison
A point estimate uses one assumption. A range applies low, base and high assumptions to the same annual measure and method. It does not combine an earnings estimate with a revenue estimate.
For direct capitalization, a higher capitalization rate produces a lower value. A supporting GRM cross-check stays separate from the direct-cap estimate. Check that property net operating income (NOI) reflects typical ongoing operations before relying on it.
Inputs and compatibility stay visible
The selected annual measure keeps its source: seller-reported, buyer-adjusted or calculated from the operating inputs. An SDE amount is not treated as EBITDA. Indevest does not verify seller figures, derive SDE, or calculate add-backs for you.
A same-measure earnings difference compares seller and buyer amounts only when both use the same annual measure. Missing or different measures cannot produce that difference. Valuation assumptions are not automatically selected, and the result is not an appraisal or a recommended offer.