Estimate what a business is worth
Three valuation methods, one honest bridge. Value the business by its forecast cash flows (DCF), by an earnings multiple, or by a revenue multiple, then walk from enterprise value to equity value by taking off debt and adding cash, because what the business is worth and what the owners hold are two different numbers. The DCF comes with a sensitivity table: a valuation that cannot survive a 1% change in its assumptions was never a number, it was a hope.
Disclaimer: This calculator gives estimates for general information only. It is not financial, medical or other professional advice, and it is not a formal valuation. A real sale price depends on the buyer, the market and negotiation, and formal valuations for tax, legal or transaction purposes need a qualified valuator.
What this calculator does
A business has no price tag until someone pays one, but it always has a value range, and the range can be reasoned about. This page reasons three ways: a discounted cash flow model that values the forecast cash the business will produce, an earnings multiple that values it the way buyers of similar businesses have paid, and a revenue multiple for businesses whose earnings are thin, negative or deliberately reinvested. Whichever method you choose, the result is an enterprise value, and the page then bridges to equity value by subtracting debt and adding cash, which is the figure that belongs to the owners.
How to use it
- Enterprise value is not what the owners get. Enterprise value prices the whole operation as if it had no debt and no cash. Equity value, enterprise value minus debt plus cash, is the owners’ stake. Selling a company “for $7 million” means nothing until the bridge is walked: $7 million of enterprise value with $3 million of debt is $4 million to the owners.
- Free cash flow, not accounting profit. The DCF wants the cash the business truly generates after tax, after the spending needed to maintain equipment, stock and systems. Profit loaded with non-cash items, or earnings before the owner replaces the delivery van, will flatter the value.
- The discount rate is a risk price. A stable business with contracted revenue might justify 10 to 12%. A small business dependent on its owner, one customer or one product carries far more risk, and buyers price that with rates of 15 to 25% or by using low multiples instead. If you are unsure, run the sensitivity table and look at the row, not your hopes.
- Terminal growth must stay humble. It is growth forever, literally. A rate above long-run economic growth claims the business eventually outgrows the economy. Two to three percent is the usual honest ceiling, and it must always be below the discount rate.
- Match the multiple to the earnings. SDE adds back the owner’s salary and perks, so SDE is the bigger number and trades at the smaller multiple. EBITDA excludes them and trades higher. Mixing SDE earnings with an EBITDA multiple is the most common way small business listings are overpriced.
How it is calculated
DCF. Each forecast year, free cash flow grows by the forecast growth rate: FCF in year t = current FCF x (1 + growth) to the power t. Each year’s cash flow is discounted back at the discount rate: present value = FCF / (1 + discount rate) to the power t, using end-of-year discounting. After the last forecast year, the terminal value assumes growth settles at the terminal rate forever: terminal value = final year FCF x (1 + terminal growth) / (discount rate – terminal growth), discounted back the same way. Enterprise value = present value of the forecast cash flows + present value of the terminal value. The sensitivity table recomputes the whole DCF at discount rates two points either side of yours and terminal growth rates one point either side.
Multiples. Enterprise value = earnings (or revenue) x the multiple. The range lines apply the multiple half a point lower and higher, because a multiple is a market mood, not a constant of nature.
The bridge. Equity value = enterprise value – total debt + cash. Value per share = equity value / shares outstanding.
Worked examples
The DCF. A business generating $500,000 of free cash flow, forecast to grow at 8% for 5 years, discounted at 12%, with terminal growth of 3%: the forecast cash flows are worth $2,244,561.16 today, the terminal value is worth $4,770,823.87 today, and enterprise value is $7,015,385.03. Note the share: 68.01% of the value sits in the terminal value, in the years nobody forecast. That is normal for DCF and it is exactly why the sensitivity table matters: at a 14% discount rate and 2% terminal growth the same business is worth $5,375,165.94; at 10% and 4%, $10,273,819.22. The honest answer is the range, not the middle cell.
The bridge. That business carries $300,000 of debt and holds $75,000 of cash: equity value = 7,015,385.03 – 300,000 + 75,000 = $6,790,385.03, or $67.90 per share across 100,000 shares.
The earnings multiple. A business with EBITDA of $400,000 at a 4.5x multiple: enterprise value $1,800,000, with the half-point range running from $1,600,000 to $2,000,000. With $200,000 of debt and $50,000 of cash, equity value is $1,650,000, $16.50 per share on 100,000 shares.
The revenue multiple. A business with $2,000,000 of revenue at a 0.8x revenue multiple: enterprise value $1,600,000. Revenue multiples suit businesses whose earnings are currently suppressed by reinvestment; they are dangerous for low-margin businesses, where a dollar of revenue may carry almost no profit with it.
Reading your result
Read the terminal value share first. If most of the DCF value sits beyond the forecast, the valuation is mostly a statement about the far future, and the sensitivity table is not decoration, it is the result. A buyer will attack exactly there, with a higher discount rate, and the table shows in advance how much ground that attack takes.
Then compare methods. When the DCF and the earnings multiple roughly agree, the business’s story and the market’s pricing point the same way, and a negotiation starts from solid ground. When they disagree wildly, one of the inputs is lying: usually the growth forecast in the DCF, or a multiple borrowed from businesses much larger, safer or more saleable than this one.
Finally, remember what a valuation is not. It is not an offer. Small businesses sell at prices moved by how many buyers exist, how financeable the deal is, how dependent the business is on the seller, and how the deal is structured (earn-outs, seller finance, retained stakes). Two identical valuations can produce sale prices a third apart. This page gives you the reasoned range to negotiate from, not the number the negotiation will end at.
Limitations
- The forecast is an input, not a finding. The DCF converts your growth story into a value with complete fidelity and zero judgement. A heroic forecast produces a heroic valuation, and the calculator cannot tell the difference. The sensitivity table is the built-in antidote: use it.
- End-of-year discounting is a convention. Cash actually arrives through the year; a mid-year convention would raise the DCF value somewhat. The convention is stated so two people using this page get the same answer.
- Owner dependence, customer concentration and key-person risk are real value factors no field here captures. They belong in the discount rate or the multiple you choose, which is to say, in your judgement.
- Taxes, transaction costs and deal structure are excluded. What an owner keeps after a sale is a smaller, more complicated number than equity value.
- This is not a formal valuation. Lenders, courts, tax authorities and serious transactions require a qualified valuator working to professional standards, with access to the accounts. Nothing here substitutes for that.
Frequently asked questions
What multiple should I use for my business?
There is no universal multiple, and the honest answer is a range for businesses like yours. As a rough orientation only: very small owner-operated businesses often change hands around 2 to 3.5 times SDE; larger, less owner-dependent businesses might reach 4 to 6 times EBITDA or beyond, and high-growth sectors price on revenue instead. Size, growth, risk and how transferable the business is move the number more than the industry label does. Whatever you use, use the range lines on this page rather than a single point, and make sure the multiple matches the earnings figure you entered.
Which is better, DCF or multiples?
They answer different questions. A multiple says what buyers have paid for similar earnings lately: market evidence, but borrowed from businesses that are not yours. A DCF says what your own forecast cash flows are worth at a stated risk price: yours, but only as good as the forecast. Professionals use both and worry when they disagree. That is the intended use here too: run both, and if the gap is wide, find out which input is doing it before believing either.
Why is the terminal value so much of the DCF?
Because a business is (in the model) a going concern that does not stop at year five. The forecast period covers the years anyone can pretend to see; the terminal value prices everything after, compressed into one formula. Sixty to eighty percent of a DCF sitting in the terminal value is typical, which is why the discount rate and terminal growth, the two numbers that control it, get a sensitivity table rather than a footnote.
Can a business with negative cash flow still have value?
Yes, and this page will show you the shape of it. A negative free cash flow run through the DCF can produce a low or negative enterprise value, which is the model saying the forecast itself destroys value; buyers of such businesses are paying for something else: assets, customers, technology or a turnaround they believe in, usually priced with a revenue multiple or an asset basis instead. Enter the numbers, use the revenue mode, and read the result as one buyer’s logic rather than the business’s only truth.
Related calculators
Method: discounted cash flow with end-of-year discounting and a Gordon growth terminal value; earnings and revenue multiples; enterprise to equity bridge, exactly as defined on this page. Estimates only, not a formal valuation. Last reviewed: 13 October 2026.