Calculation of SDE
I am trying to calculate the business valuation for a client of mine who is in an LLC with another individual. The other party is no longer involved in the business and the primary owner would like to buy out the individual’s 9% stake. The business was recently purchased in April 2017 for $300,000.
I am working on calculating the SDE but had a question. When I add back the intangible assets, should those be added back at net book value or at original value?
You can refer to our article “How to Value a Business” https://fitsmallbusiness.com/how-to-value-a-business/ to find the steps necessary to determine what the business is worth, and how to calculate the Seller’s Discretionary Earnings. As far as determining what value to use for the intangible assets, SBA uses net book value for valuing intangible assets. I would recommend contacting a CPA if you require additional information and to confirm that the calculations are correct.