Business Valuation Calculator
This professional-grade calculator estimates the value of a small business using three major approaches: market multiples (SDE/EBITDA/Revenue), discounted cash flow (DCF), and asset-based. It’s designed for owners, buyers, brokers, and advisors who need transparent, auditable estimates with risk adjustments and a clear methodology.
Calculator
Results
Weighted Valuation — Low
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Weighted Valuation — Base
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Weighted Valuation — High
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Data Source & Methodology
AuthoritativeDataSource: Kroll (formerly Duff & Phelps), Cost of Capital Navigator (latest edition) and NYU Stern (A. Damodaran), Annual Data – Country & Industry Costs of Capital. See: Kroll Cost of Capital and NYU Stern data. All calculations strictly follow the formulas and data provided by this source.
The Formula Explained
Market Multiples: \( \text{Value} = \text{Metric} \times \text{Multiple} \)
\(\text{SDE-based Equity Value} = \text{SDE} \times M_{SDE}\)
\(\text{EBITDA-based Enterprise Value} = \text{EBITDA} \times M_{EBITDA}\)
\(\text{Revenue-based Enterprise Value} = \text{Revenue} \times M_{Rev}\)
DCF Enterprise Value:
\( EV = \sum_{t=1}^{N} \frac{FCF_t}{(1+WACC)^t} + \frac{FCF_{N+1}}{(WACC - g_\infty)} \cdot \frac{1}{(1+WACC)^N} \)
with \( FCF_{t} = FCF_0 \cdot (1+g)^t \) and \( FCF_{N+1} = FCF_N \cdot (1+g_\infty) \).
Equity value: \( Equity = EV - (Debt - Cash) \).
Risk Adjustments (sequential): \( V_{adj} = V \cdot (1 - d_{size}) \cdot (1 - d_{key}) \cdot (1 - d_{DLOM}) \).
Weighted Result: \( V_{weighted} = w_{market} \cdot V_{market} + w_{DCF} \cdot V_{DCF} + w_{asset} \cdot V_{asset} \), with \(\sum w = 1\).
Glossary of Variables
- SDE: Seller’s Discretionary Earnings (owner-operator cash flow).
- EBITDA: Earnings before interest, taxes, depreciation, amortization.
- Revenue: Top-line sales.
- FCF: Free cash flow available to all capital providers.
- WACC: Weighted Average Cost of Capital (discount rate).
- Enterprise Value (EV): Value of operations before cash/debt adjustments.
- Equity Value: EV minus net debt.
- DLOM: Discount for Lack of Marketability.
How It Works: A Step‑by‑Step Example
Suppose SDE = $300k, EBITDA = $220k, Revenue = $1.5M, FCF = $180k, Cash = $50k, Debt = $120k. Multiples ranges: SDE 2.2/2.8/3.5; EBITDA 4/5/6.5; Revenue 0.4/0.6/0.9. DCF with 5 years, growth 6%, WACC 14%, terminal growth 2.5%; risk discounts 5% size, 5% key-person, 10% DLOM; weights 40/40/20.
The calculator computes each method’s low/base/high, applies discounts sequentially, converts EV to equity where needed, then aggregates by weights to produce the final range. Use the table and chart above to inspect each component.
Frequently Asked Questions
When should I favor SDE vs EBITDA?
SDE suits owner‑operated businesses where the buyer will replace the owner. EBITDA suits larger firms with professional management and cleaner financials.
How do I compute WACC?
WACC ≈ cost of equity × equity weight + after‑tax cost of debt × debt weight. Cost of equity often uses CAPM with size/illiquidity premiums for small firms.
What if growth is negative?
You can enter a negative growth rate. The DCF will reflect declining cash flows and typically lower valuations.
Why apply discounts after each method?
Market, income, and asset approaches all need reconciliation for small private firms: size, customer concentration, key‑person, and marketability risks reduce market value of equity.
Is this legal or tax advice?
No. This is an educational tool. For transactions, ESOPs, or tax matters, consult a credentialed valuation professional (ASA, CFA, CVA).
Tool developed by Ugo Candido. Content reviewed by the CalcDomain Editorial Board.
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