Business Valuation Calculator – Earnings, Cash Flow, Assets and Market Multiples
This Business Valuation Calculator gives you a structured way to estimate what a business might be worth using multiple methods. Instead of relying on a single number or rule of thumb, you can compare valuations based on earnings, discounted cash flow (DCF), assets, market comparables and investor break-even scenarios. Each method highlights a different perspective on the same business.
Business valuation is both an art and a science. Financial formulas can help, but assumptions about growth, risk, margins and competitive dynamics play a major role. This calculator focuses on the numerical side so you can experiment quickly, understand valuation drivers and prepare for deeper discussions with buyers, investors or advisors.
Mode 1: Earnings Multiple Valuation
The earnings multiple approach values a business by multiplying its annual earnings by a market-based multiple. For owner-managed businesses, this might use seller’s discretionary earnings (SDE). For more established companies, it may use net profit or EBITDA. The key is to choose a measure that reflects sustainable earnings available to the owner or investors.
Formula for Earnings Multiple Valuation
In this calculator you enter annual earnings and a low and high multiple to create a valuation range. For example, a business with 250,000 in earnings and a 3–5× range would be valued between 750,000 and 1,250,000, with a midpoint around 1,000,000.
Mode 2: Discounted Cash Flow (DCF) Valuation
The discounted cash flow method values a business as the present value of its future free cash flows. Instead of focusing only on current earnings, DCF projects cash flows forward, grows them at an assumed rate, discounts them back at a rate that reflects risk and adds a terminal value representing cash flows beyond the explicit projection period.
Core DCF Formulas
Here, g is the annual growth rate and r is the discount rate. The calculator sums the present value of all projected cash flows.
To capture value beyond the projection period, it uses a simple terminal value formula (Gordon growth style):
This terminal value is then discounted back to today and added to the present value of the projected cash flows to produce a total DCF valuation.
Mode 3: Asset-Based Valuation
The asset-based approach values a business based on its balance sheet: assets minus liabilities. It is especially relevant for asset-heavy businesses such as manufacturers, real estate holding companies or capital-intensive operations. For service or technology firms whose value is driven by people and intellectual property, asset-based valuation often understates true value.
Asset-Based Valuation Formula
The calculator also shows an equity-to-assets ratio, which gives a quick sense of leverage and balance sheet strength.
Mode 4: Market Multiples (Revenue and EBITDA)
Market multiple valuation compares your business to similar companies that have been sold or are publicly traded. Instead of projecting cash flows directly, you apply revenue or EBITDA multiples derived from comparable businesses, adjusting for size, growth and risk.
Market Multiple Formulas
The calculator returns both valuations, along with a range and midpoint. If the two methods give similar results, you gain confidence in the valuation band. If they differ widely, you may need to refine your multiples or review your financial assumptions.
Mode 5: Break-Even Valuation for Investors
The break-even valuation mode looks at the business from an investor’s perspective. Given a current annual cash flow, a required rate of return and a long-term growth rate, the calculator estimates the maximum price an investor might pay to achieve that target return over the long run.
Simple Break-Even Valuation Formula
Using a Gordon-style model based on a perpetuity growing at a constant rate, the break-even value is approximated as:
Here, r is the investor’s required return and g is the long-term growth rate. The calculator then shows the implied multiple on current cash flow and a capitalization rate. This can be used as a quick check on whether an asking price is compatible with an investor’s target return.
Choosing Inputs and Interpreting Results
The accuracy of any valuation depends on reasonable inputs. Some practical tips:
- Use normalized earnings and cash flows that smooth out one-off items, unusual expenses or temporary windfalls.
- Be conservative with growth rates, especially over longer horizons.
- Set discount rates and required returns that reflect business risk, industry volatility and capital costs.
- Choose asset values that reflect fair market value, not just historical book value, where possible.
- Base revenue and EBITDA multiples on real comparable transactions or market data rather than optimistic guesses.
It is often more useful to work with valuation ranges than single-point estimates. If different methods cluster around a similar band, that band can guide negotiations. If they diverge, the differences can highlight which assumptions matter most.
Examples of Business Valuation Scenarios
Example 1: Small Service Business Using Earnings Multiple
A consulting business generates 200,000 in owner’s discretionary earnings. Based on similar sales in the region, you believe a reasonable range is 2.5–3.5× earnings. The calculator shows a valuation band of 500,000 to 700,000, with a midpoint of 600,000. You can use this as a starting point for pricing discussions.
Example 2: Growing Company Using DCF
A growing software company has 150,000 in free cash flow, expected to grow 10% per year for five years. You use a 15% discount rate and a 3% terminal growth rate. The DCF tab estimates present value of projected cash flows plus terminal value, and provides an implied multiple on current cash flow that you can compare with market multiples.
Example 3: Asset-Heavy Business
An equipment rental company owns 800,000 in tangible assets and 50,000 in intangible assets, with 400,000 in liabilities. The asset-based tab shows total assets of 850,000, net asset value of 450,000 and an equity-to-assets ratio of roughly 52.9%. You can compare this floor value to earnings- and cash-flow-based valuations.
Example 4: Market Multiple and Break-Even Check
A business earns 300,000 in EBITDA and 1.5 million in revenue. Market data suggests revenue multiples of 1.2–1.6× and EBITDA multiples of 4–6× in the industry. You set 1.4× and 5× as center values and compute a market valuation range. You then use the break-even tab with 300,000 cash flow, 18% required return and 2% growth to see if the implied value is consistent with your return expectations.
How to Use This Tool Effectively
- Start with the Earnings Multiple tab for a quick rule-of-thumb valuation.
- Use the DCF tab when you have cash flow forecasts and want a more detailed, time-based view.
- Check the Asset-Based tab to understand balance sheet strength and downside protection.
- Apply the Market Multiples tab to align expectations with comparable companies and transactions.
- Run the Break-Even tab from an investor perspective to see what valuation supports your target return.
- Compare results across methods and focus on ranges rather than exact numbers.
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Business Valuation Calculator FAQs
Frequently Asked Questions About Business Valuation
Understand how to interpret earnings multiples, DCF, asset-based values, market comps and investor break-even scenarios.
No single method is best in all cases. Earnings multiples and market multiples are common for quick benchmarking, DCF can be more detailed but assumption-sensitive, and asset-based valuation is often a floor for asset-heavy businesses. Comparing several methods usually yields better insight than relying on only one.
Multiples are usually based on comparable transactions or public companies adjusted for size, growth, risk and profitability. Industry reports, broker data and professional advisors can help you identify realistic ranges. When unsure, use conservative multiples and focus on a valuation band rather than a single number.
The discount rate should reflect both the time value of money and the risk of the business. It is often based on a weighted average cost of capital (WACC) or a required equity return. Riskier businesses usually require higher discount rates than stable, mature businesses.
No. The calculator is for planning and educational use only. Formal valuations for legal, tax, regulatory or transaction purposes should be performed or reviewed by qualified professionals who can apply jurisdiction-specific standards and detailed analysis.
You can experiment with DCF and multiples, but early-stage companies often require methods such as scenario analysis, venture capital models or scorecard methods. Use the calculator as a framework while recognizing that startup valuation depends heavily on qualitative judgment and future funding rounds.
The calculator applies your chosen currency symbol consistently but does not convert between currencies. If you are analyzing cross-border transactions, convert financials into one base currency before using the tool.