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About the Business Valuation Calculator
Business valuation is the process of determining the economic worth of a company. Whether you are considering selling a business, raising equity investment, buying out a partner, settling an estate, or simply benchmarking your progress, understanding how much your business is worth is a fundamental financial planning exercise. This calculator applies three widely used valuation methodologies in parallel — revenue multiples, EBITDA multiples, and a full discounted cash flow (DCF) analysis — so you can compare the results and understand the range of potential valuations.
Revenue multiple valuation
Revenue multiples express enterprise value as a function of annual revenue: Value = Revenue × Multiple. This method is most common for high-growth businesses, SaaS companies, and early-stage companies that may not yet be profitable. A traditional small business typically trades at 0.5–2x revenue. A profitable software business with moderate growth might trade at 3–6x. A high-growth SaaS company expanding at 50%+ annually with strong net revenue retention might command 10–20x revenue. Revenue multiples compress when interest rates rise and expand when capital is cheap.
EBITDA multiple valuation
EBITDA multiples are the most common valuation method in private equity and M&A transactions for profitable businesses. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) approximates operating cash flow and is capital-structure neutral. Small businesses typically trade at 3–6x EBITDA. Middle-market businesses often command 6–10x. Larger businesses with strong competitive positions, recurring revenue, or platform acquisition potential can exceed 12–15x EBITDA.
Discounted cash flow (DCF) valuation
The DCF method values a business based on the present value of all future free cash flows, discounted back at a rate that reflects the riskiness of those cash flows. The model projects revenue forward, applies the current EBITDA margin to estimate free cash flow, discounts each year's cash flow to present value, then adds a terminal value representing all cash flows beyond the projection period. Terminal Value = Final Year FCF × (1 + g) / (WACC − g), where g is the terminal growth rate.
Choosing a discount rate
The discount rate is the required rate of return an investor demands given the riskiness of the investment. For large publicly traded companies, WACC typically falls between 8–12%. For private companies, which are less liquid and face higher operational risk, discount rates of 15–25% are common. The specific rate depends on company size, industry volatility, customer concentration, management team quality, and competitive moats. Sensitivity analysis — running the DCF with multiple discount rate assumptions — is standard practice.
Understanding your valuation range
No single valuation method is definitively correct, and experienced buyers and investors typically triangulate across multiple methods. The revenue multiple approach is most relevant for growth-stage companies; the EBITDA multiple is most relevant for mature, profitable businesses; and the DCF provides an intrinsic value anchor. When the three methods produce similar values, there is higher confidence in the estimate. When they diverge significantly, it often reflects a growth-vs-profitability trade-off that a buyer will evaluate based on their own assumptions.
Frequently Asked Questions
What is EBITDA and why is it used for valuation?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It is used as a proxy for operating cash flow because it strips out financing decisions (interest), tax strategies, and non-cash accounting charges, making it easier to compare businesses across different capital structures. A limitation is that it ignores capital expenditure requirements — two businesses with identical EBITDA but different capex needs are not equally valuable.
What multiple should I use for my business?
The appropriate multiple depends on your industry, growth rate, margin profile, and the type of buyer. For a main street business (retail, restaurant, trades), 2–4x EBITDA is typical. For a professional services firm with recurring client relationships, 4–7x EBITDA. For a software business with strong growth, 6–12x EBITDA or 3–8x revenue. To benchmark your specific situation, research recent M&A transactions in your sector or consult a business broker who operates in your market.
How accurate is a DCF valuation?
A DCF is only as accurate as its assumptions. Small changes in the discount rate or terminal growth rate produce large changes in the output because the terminal value often represents 60–80% of total DCF value. A change from 12% to 14% discount rate can reduce enterprise value by 20–30%. DCF models should always be run as sensitivity analyses with a range of inputs rather than a single-point estimate.
What is enterprise value vs equity value?
Enterprise value (EV) represents the total value of a business to all capital providers — both debt holders and equity holders. It is calculated as: EV = Equity Value + Net Debt (total debt minus cash). Equity value is what shareholders receive — calculated as EV minus net debt. Valuation multiples like EV/Revenue and EV/EBITDA are enterprise-value multiples and are therefore capital-structure neutral.
Disclaimer
Past performance does not guarantee future returns. Investment markets carry risk including potential loss of principal.
This calculator is for informational and educational purposes only. Results are estimates based on the inputs you provide and assumptions that may not reflect your actual situation. It does not constitute financial, investment, tax, legal, or accounting advice. Verify results independently and consult a qualified professional before making financial decisions. Digital.Finance makes no guarantee of accuracy or completeness.