Estimate the worth of your business using common valuation methods.
Understanding Business Valuation
Determining the worth of a business is a crucial step for various reasons, including selling the business, seeking investment, estate planning, or simply understanding its financial health. There isn't a single, definitive way to value a business; instead, multiple methods are used, often in combination, to arrive at a comprehensive estimate.
Common Valuation Methods
This calculator employs two widely recognized approaches:
Earnings Multiple Method (Revenue Multiple): This method is popular for its simplicity and is often used for businesses with predictable revenue streams. It assumes that a business's value is a multiple of its earnings (revenue or profit). The multiplier is typically based on industry averages, company size, growth potential, and risk factors.
Formula:Valuation = Annual Revenue × Industry Market Multiplier
For a more refined approach, one might use net profit instead of revenue, requiring a profit margin to calculate from revenue.
Asset-Based Valuation (Net Asset Value): This method focuses on the tangible and intangible assets of a business, subtracting its liabilities. It's often used for businesses with significant physical assets or those that are asset-heavy (e.g., real estate, manufacturing).
Formula:Valuation = Total Asset Value - Total Liability Value
How to Use This Calculator
To get an estimated valuation:
Annual Revenue: Enter your business's total revenue for the last full fiscal year.
Net Profit Margin: Enter your business's net profit as a percentage of its revenue (Net Profit / Revenue × 100). This is used if you want to consider a profit-based multiple, though this calculator directly uses revenue multiple for simplicity of inputs.
Industry Market Multiplier: Research average multipliers for your industry. These vary significantly. For example, tech startups might have higher multipliers than established retail businesses. Consult industry reports or financial advisors for relevant multiples.
Total Asset Value: Sum the fair market value of all your business's assets (e.g., property, equipment, inventory, intellectual property).
Total Liability Value: Sum all the debts and obligations of your business (e.g., loans, accounts payable).
The calculator will provide two estimations based on the inputs. The final valuation often involves judgment and may be a weighted average or a range derived from these methods.
Important Considerations
Business valuation is complex. Factors not captured by this calculator include:
Growth potential
Market position and competitive landscape
Management team quality
Brand reputation
Customer base stability
Economic conditions
This calculator provides a simplified estimation. For critical financial decisions, always consult with a qualified business appraiser, accountant, or financial advisor.
function calculateBusinessWorth() {
var annualRevenue = parseFloat(document.getElementById("annualRevenue").value);
var netProfitMargin = parseFloat(document.getElementById("netProfitMargin").value);
var marketMultiplier = parseFloat(document.getElementById("marketMultiplier").value);
var assetValue = parseFloat(document.getElementById("assetValue").value);
var liabilityValue = parseFloat(document.getElementById("liabilityValue").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
var revenueBasedValuation = "N/A";
var assetBasedValuation = "N/A";
var netProfit = "N/A";
if (!isNaN(annualRevenue) && !isNaN(marketMultiplier)) {
revenueBasedValuation = annualRevenue * marketMultiplier;
} else {
revenueBasedValuation = "Please enter valid numbers for Annual Revenue and Market Multiplier.";
}
if (!isNaN(assetValue) && !isNaN(liabilityValue)) {
assetBasedValuation = assetValue – liabilityValue;
if (assetBasedValuation < 0) {
assetBasedValuation = "Net asset value is negative. Consider this indicator carefully.";
}
} else {
assetBasedValuation = "Please enter valid numbers for Total Asset Value and Total Liability Value.";
}
if (!isNaN(annualRevenue) && !isNaN(netProfitMargin)) {
netProfit = (annualRevenue * netProfitMargin) / 100;
} else {
netProfit = "Please enter valid numbers for Annual Revenue and Net Profit Margin.";
}
var outputHTML = "