How to Calculate Interest Rate Using Present and Future Value

Estimated Business Worth:

$0.00

function calculateBusinessValue() { var ebitda = parseFloat(document.getElementById('ebitda').value); var multiplier = parseFloat(document.getElementById('multiplier').value); var cash = parseFloat(document.getElementById('cash').value) || 0; var debt = parseFloat(document.getElementById('debt').value) || 0; var resultBox = document.getElementById('valuation-result-box'); var display = document.getElementById('valuation-amount'); var breakdown = document.getElementById('valuation-breakdown'); if (isNaN(ebitda) || isNaN(multiplier) || ebitda < 0 || multiplier < 0) { alert("Please enter valid positive numbers for Profit and Multiplier."); return; } var coreValue = ebitda * multiplier; var totalValue = coreValue + cash – debt; if (totalValue < 0) totalValue = 0; var formatter = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD', maximumFractionDigits: 0 }); display.innerHTML = formatter.format(totalValue); breakdown.innerHTML = "Breakdown:Core Operations Value (Profit x Multiplier): " + formatter.format(coreValue) + "Plus Cash/Assets: " + formatter.format(cash) + "Minus Debts: " + formatter.format(debt); resultBox.style.display = 'block'; }

How to Value a Business: The Multiplier Method

Determining the fair market value of a business is crucial for owners looking to sell, investors seeking opportunities, or for internal succession planning. This calculator uses the Earnings Multiplier Method, which is one of the most common valuation frameworks for small to mid-sized enterprises (SMEs).

Understanding the Formula

The core calculation follows this logic:

• EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. This represents the core profitability of the business.
• Multiplier: This figure varies by industry. A stable service business might have a 2x-3x multiplier, while a high-growth SaaS company might see 5x-10x.
• Adjustments: Once the "Enterprise Value" is calculated (Profit x Multiplier), we add liquid cash on hand and subtract any outstanding liabilities or debts.

Realistic Example Valuation

Imagine a local HVAC company with the following financials:

• Annual Profit: $200,000
• Industry Multiplier: 3.0 (Typical for home services)
• Cash in Bank: $30,000
• Business Debt: $15,000

Calculation: ($200,000 × 3.0) + $30,000 – $15,000 = $615,000

Factors That Increase Your Multiplier

While industry averages provide a baseline, certain factors can push your specific multiplier higher:

• Recurring Revenue: Subscription models or long-term contracts are valued higher than one-off sales.
• Low Owner Dependency: If the business can run without the owner present, it is significantly more valuable.
• Market Share: Dominating a local or niche market provides a "moat" that buyers are willing to pay for.
• Growth Trends: A business with year-over-year growth is worth more than a stagnant or declining one.

Disclaimer: This calculator provides a rough estimate based on the earnings multiplier method. For a formal valuation for legal or tax purposes, please consult with a certified business appraiser or forensic accountant.