What is the value of my business?

Similar to bond or real estate valuations, the value of a business can be expressed as the present value of expected future earnings. Use this calculator to determine the value of your business today based on discounted future cash flows with consideration to "excess compensation" paid to owners, level of risk, and possible adjustments for small size or lack of marketability.

Input

Annual earnings before interest, taxes, depreciation, and amortization ?

Earnings before interest, taxes, depreciation, and amortization for a typical year.

"Excess compensation" paid to owners (if any) ?

Amount paid to owners above a fair market salary, added back to earnings.

Anticipated rate of earnings/compensation growth ?

Expected annual growth in earnings and compensation; use 0 if earnings are expected to stay level.

Number of years earnings are expected to continue ?

Number of years to project earnings; choosing the maximum of 10 assumes the business continues indefinitely (in perpetuity).

Level of business/industry/financial risk ?

Overall risk level of the business; retail and restaurants are typically lower risk than manufacturing or high-tech firms. Typically restaurants and retail are lower risk than manufacturing and high tech.

Discount for lack of marketability ?

Reduction applied to reflect how much harder it is to sell an interest in a private business compared to a public stock.

Enter your values and select Calculate.

The business value figure is a capitalized-earnings estimate: it takes your projected earnings (including any excess owner compensation and growth), discounts them back to today using a rate tied to the risk level you chose, and then subtracts a discount for lack of marketability. It is one reasonable way to think about value, not the only one, and not a market-tested price.

Two inputs tend to move the result the most: the risk level, which sets the discount rate applied to every future dollar of earnings, and the number of years earnings are expected to continue, since running the maximum of 10 years treats the business as an ongoing concern rather than a short-lived one. Small changes to either can shift the value meaningfully, so it is worth trying a few combinations.

This model does not account for taxes, transaction costs, debt or working capital adjustments, or shifts in the business's actual performance or industry conditions. It also assumes earnings and growth continue as entered, which real businesses rarely do exactly.

Treat this as a starting point for a conversation, not a final price. If you are preparing for a sale, raising capital, or planning an exit, bring this figure and the assumptions behind it to an accountant or business appraiser, and revisit the numbers whenever earnings, growth expectations, or the risk profile of the business change.

This information may help you analyze your financial needs. It is based on information and assumptions provided by you regarding your goals, expectations and financial situation. The calculations do not infer that the company assumes any fiduciary duties. The calculations provided should not be construed as financial, legal or tax advice. In addition, such information should not be relied upon as the only source of information. This information is supplied from sources we believe to be reliable but we cannot guarantee its accuracy. Hypothetical illustrations may provide historical or current performance information. Past performance does not guarantee nor indicate future results.