Business ROI & Payback Calculator
Evaluate whether a specific business is priced fairly. Enter the asking price and annual SDE to see how many years the cash flow takes to repay the price, the implied multiple, and the annual return.
What payback period and multiple mean
The payback period is simply asking price divided by annual SDE — the number of years the business's own cash flow needs to return your purchase price. A $500,000 business earning $200,000 of SDE pays back in 2.5 years. Because both numbers come from the same division, the payback period and the SDE multiple are the same figure viewed two ways: 2.5 years of payback is a 2.5× multiple, which is a 40% annual return on the price.
A lower payback and lower multiple generally mean a cheaper deal — but cheap usually has a reason. Owner-dependent operations, one dominant customer, declining sales, or cash-based books all push multiples down. Recurring contracts, a management team that stays, clean reviewed financials, and growth push them up. Most Canadian small businesses trade between roughly 2× and 4× SDE.
Confirm the SDE you're paying for with the SDE calculator and cross-check the price against real marketplace data using the business valuation calculator. Read how to value a business in Canada and what SDE is and how it's calculated, then browse businesses for sale to compare real asking prices.
This calculator gives an estimate for planning purposes only and is not financial, tax, or legal advice. It ignores debt service, taxes and reinvestment needs.
Frequently asked questions
Most Canadian small-business buyers look for a payback of roughly 2.5 to 4 years — the inverse of the standard 2×–4× SDE multiple. Under 2.5 years usually signals risk (owner dependence, declining sales, or messy books); over 4 years needs recurring revenue, growth or a management team to justify.
Simple payback is purchase price ÷ annual SDE. A $500,000 business earning $200,000 a year pays back in 2.5 years, which is the same as a 2.5× multiple and a 40% annual return on the price. The growth-adjusted figure compounds the cash flow each year before it accumulates against the price.
No. Payback and return here are calculated on the full purchase price using pre-tax SDE. If you finance the deal, your actual cash-on-cash return is measured against your down payment and net of loan payments — use the loan calculator alongside this one to model that.
No. Price follows risk. A business selling at 1.5× SDE usually has a reason: one customer at 40% of revenue, an owner who is the business, a lease that ends soon, or earnings that can't be verified. Diligence the reason before you celebrate the price.