Business Valuation Calculator

What a Business Valuation Calculator Helps You Do

A business valuation is the process of estimating what a company is worth today based on how it earns, how it is expected to grow, and what risks are involved in generating those earnings. A Business Valuation Calculator turns those ideas into a structured model, so you can test assumptions, compare methods, and get a clear estimate for enterprise value and equity value.

This calculator is designed for practical use cases: preparing for a sale, evaluating an acquisition, setting partner buy-in terms, negotiating investment, or sanity-checking a broker opinion. It provides two mainstream valuation approaches—discounted cash flow (DCF) and market multiples—plus a solver that helps you understand what discount rate would be required to justify a target equity value. You can also generate a valuation table that breaks down discounted cash flows period by period for transparency and analysis.

Enterprise Value vs Equity Value

One of the most common sources of confusion in valuation is mixing up enterprise value and equity value. Enterprise value (EV) is the value of the operating business available to all capital providers. Equity value is what remains for owners after considering financing. That difference matters because two businesses with identical operations can have very different equity values if one is heavily indebted and the other is not.

A simple adjustment often used in valuation is:

In real transactions, the definition of “debt” and “cash” can include other items (like working capital targets, leases, or unusual liabilities), but the core idea remains the same: enterprise value reflects the operating engine; equity value reflects what owners receive after the capital structure is considered.

Discounted Cash Flow Valuation

DCF valuation is a fundamentals-based method. Instead of relying on comparable companies or market multiples, DCF asks a direct question: how much are the company’s future cash flows worth today? The logic is that a dollar earned in the future is worth less than a dollar earned today, because money has a time value and because future cash flows are uncertain.

Step 1: Start with normalized free cash flow

The DCF method begins with a baseline free cash flow. For planning purposes, free cash flow is often treated as the cash the business can generate for investors after operating expenses and required reinvestment. If a business has one-time expenses, unusual owner compensation, or temporary revenue spikes, it is best to “normalize” the baseline cash flow to represent a sustainable run-rate.

Step 2: Forecast cash flows for a finite period

You choose a forecast horizon, commonly 3 to 10 years depending on visibility and stability. During that horizon, you model growth assumptions. This calculator uses a straightforward growth rate for projected free cash flows. More advanced models can incorporate margin changes, reinvestment, working capital, and multiple product lines, but the principle is the same: estimate cash flow each period.

Step 3: Discount projected cash flows back to present value

Each forecast cash flow is discounted using a discount rate, commonly interpreted as a required return. A higher required return indicates higher risk, which reduces valuation. A lower required return indicates lower risk, which increases valuation.

In this formula, CF_t is the cash flow in period t, and r is the discount rate. The valuation table tab shows these discounted values period by period.

Step 4: Add a terminal value

Most of a stable business’s value often comes from cash flows beyond the explicit forecast period. Instead of forecasting year 11, 12, 13, and so on, DCF models usually include a terminal value at the end of the forecast horizon. A common approach is the Gordon Growth model, which assumes cash flows grow at a stable long-term rate.

Here, CF_N is the final forecast cash flow, g is the terminal growth rate, and r is the discount rate. For the model to be mathematically stable, the discount rate must be greater than the terminal growth rate. As r approaches g, terminal value increases sharply, which is one reason terminal assumptions must be conservative.

Choosing Realistic Growth and Discount Rate Assumptions

The usefulness of a valuation calculator depends on the realism of its inputs. Small changes in assumptions can produce large changes in value. Growth assumptions should reflect the business model, market size, competitive environment, and operational constraints. Discount rate assumptions should reflect business risk, customer concentration, cyclicality, and the stability of cash generation.

A practical approach is to run three scenarios: a conservative case, a base case, and an optimistic case. If your valuation only “works” under optimistic assumptions, that is a signal to revisit either the investment thesis or the cash flow normalization.

Market Multiples Valuation

Multiples valuation is a market-based method. Instead of valuing the company from first principles, it uses a shorthand: value is a multiple of a financial metric. Common metrics include EBITDA, EBIT, revenue, and net income.

Why multiples differ across businesses

Two companies with the same EBITDA can trade at different multiples because buyers are paying for more than this year’s profit. They are paying for growth, durability, and confidence in future cash generation. A company with recurring revenue and low churn may receive a higher multiple than a company with volatile sales. A company with high customer concentration may receive a lower multiple than a company with diversified demand.

Applying adjustments

In the real world, transaction structure and liquidity matter. Private-company valuations often include adjustments for control, marketability, or minority interests. This calculator provides an optional percentage adjustment to reflect those effects when estimating value from a multiple. Use this carefully, and keep it consistent with the type of comparable you are referencing.

Using the Required Discount Rate Solver

Valuation is often used in reverse: you may start with a target equity value (for a fundraising round, a buyout offer, or an owner’s expectations) and then ask what discount rate would justify that number given forecast assumptions. This calculator’s solver estimates the discount rate that makes the DCF equity value match your target.

This is helpful because it reframes valuation as a question of risk and required return. If the solver produces a required discount rate that feels unrealistically low, the target equity value may be aggressive. If it produces an extremely high rate, the target equity may be conservative, or the business may be high risk.

Understanding the Valuation Table

A valuation is more credible when you can show how it is built. The valuation table breaks down projected cash flow and its present value over time. It is especially useful for sharing assumptions with partners, investors, or internal stakeholders. You can build the table yearly or quarterly, and export it to CSV to run additional analysis in a spreadsheet.

Common Use Cases for Business Valuation

• Buying or selling a business: Create a structured view of value, then negotiate with evidence rather than intuition.
• Raising capital: Understand the implied return expectations behind a target valuation.
• Partner buy-ins and buyouts: Create a repeatable framework for equity pricing discussions.
• Strategic planning: Link operational improvements to valuation by testing how cash flow and risk changes affect value.
• Scenario planning: Explore conservative and optimistic cases to understand valuation ranges rather than a single number.

Limitations to Keep in Mind

This calculator is an estimation tool. It assumes a smooth growth path and a consistent discount rate. Real businesses experience cycles, competitive shocks, pricing changes, and reinvestment needs that vary over time. It also does not explicitly model working capital, capex schedules, taxes, or debt amortization. Those factors can be material in detailed valuation work.

Even with those limitations, a structured model is far better than guesswork. If you treat the outputs as ranges—supported by reasonable assumptions—you can make better decisions, communicate expectations clearly, and spot unrealistic valuation narratives quickly.

How to Use This Calculator Effectively

• Start with conservative, normalized free cash flow rather than best-case performance.
• Use a forecast horizon that matches how far you can reasonably see the business.
• Choose a terminal growth rate that reflects long-run economic reality for mature businesses.
• Test at least three scenarios and compare DCF outcomes with multiples as a sanity check.
• Use the solver to understand what return expectations are implied by any target valuation.