{
  "id": "business-valuation",
  "version": "5cbd6e6581a8",
  "status": "published",
  "name": "Business Valuation Calculator",
  "question": "What is my business valuation?",
  "summary": "Estimates what a small business is worth by a multiple of earnings, a multiple of revenue, net assets, or capitalized earnings with a growth rate.",
  "category": "finance",
  "subcategory": "business",
  "url": "https://www.acalculator.org/finance/business-valuation-calculator",
  "markdown": "https://www.acalculator.org/finance/business-valuation-calculator.md",
  "kind": "function",
  "method": "Earnings multiple: value = earnings × multiple. Revenue multiple: value = revenue × multiple. Net assets: value = assets − liabilities. Capitalized earnings: value = earnings × (1 + g) ÷ (r − g).",
  "assumptions": [
    "The multiples, discount rate and growth rate are yours to choose from sales of similar businesses; the calculator does not look them up.",
    "Capitalized earnings assume earnings grow at the same rate for ever and the discount rate is above the growth rate.",
    "An estimate for planning, not an appraisal: the IRS lists the asset-based, market and income approaches and expects an appraiser to weigh them."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "method": {
        "title": "Method",
        "description": "A multiple of yearly earnings, a multiple of yearly revenue, net assets, or capitalized earnings with growth.",
        "type": "string",
        "enum": [
          "earnings",
          "revenue",
          "assets",
          "income"
        ]
      },
      "e": {
        "title": "Yearly earnings",
        "description": "The business’s yearly earnings: seller’s discretionary earnings (SDE) or EBITDA.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "em": {
        "title": "Earnings multiple",
        "description": "What buyers pay per dollar of yearly earnings, from sales of similar businesses.",
        "type": "number",
        "minimum": 0,
        "maximum": 100
      },
      "rev": {
        "title": "Yearly revenue",
        "description": "The business’s yearly sales.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "rm": {
        "title": "Revenue multiple",
        "description": "What buyers pay per dollar of yearly revenue, from sales of similar businesses.",
        "type": "number",
        "minimum": 0,
        "maximum": 100
      },
      "assets": {
        "title": "Total assets",
        "description": "What the business owns, at fair market value.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "debts": {
        "title": "Total liabilities",
        "description": "What the business owes.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000
      },
      "r": {
        "title": "Discount rate",
        "description": "The yearly return a buyer wants for the risk of this business.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "maximum": 100
      },
      "g": {
        "title": "Long-term growth rate",
        "description": "How fast earnings grow each year, for ever. It must be below the discount rate.",
        "type": "number",
        "x-unit": "percent",
        "minimum": -50,
        "maximum": 50
      }
    }
  },
  "outputs": {
    "value": {
      "label": "Business value",
      "description": "The estimate by the method you chose.",
      "format": "money"
    },
    "next": {
      "label": "Next year’s earnings",
      "description": "Yearly earnings × (1 + growth ÷ 100), for capitalized earnings.",
      "format": "money"
    },
    "capRate": {
      "label": "Capitalization rate",
      "description": "Discount rate − growth rate, for capitalized earnings.",
      "format": "percent"
    },
    "multiple": {
      "label": "Implied earnings multiple",
      "description": "Value ÷ this year’s earnings, for capitalized earnings.",
      "format": "number"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "method": "earnings",
      "e": 250000,
      "em": 3,
      "rev": 1000000,
      "rm": 0.8,
      "assets": 900000,
      "debts": 350000,
      "r": 20,
      "g": 3
    },
    "outputs": {
      "value": 750000
    },
    "text": "Your business is worth about $750,000.00 by this method."
  },
  "examples": [
    {
      "given": {
        "method": "earnings",
        "e": 250000,
        "em": 3
      },
      "expect": {
        "value": 750000
      },
      "source": "IRS, Internal Revenue Manual 4.48.4 Business Valuation Guidelines (§4.48.4.2.3: the market approach, with multiples consistent with the benefit stream), https://www.irs.gov/irm/part4/irm_04-048-004; hand calculation in content.mdx: 250,000 × 3 = 750,000"
    },
    {
      "given": {
        "method": "income",
        "e": 100000,
        "r": 13,
        "g": 3
      },
      "expect": {
        "value": 1030000,
        "next": 103000,
        "capRate": 10,
        "multiple": 10.3
      },
      "source": "OpenStax, Principles of Finance, §11.2 Dividend Discount Models (constant growth: value = D₀(1 + g) ÷ (r − g)), https://openstax.org/books/principles-finance/pages/11-2-dividend-discount-models-ddms; hand calculation in content.mdx: 100,000 × 1.03 ÷ 0.10 = 1,030,000"
    },
    {
      "given": {
        "method": "assets",
        "assets": 900000,
        "debts": 350000
      },
      "expect": {
        "value": 550000
      },
      "source": "IRS, Internal Revenue Manual 4.48.4 Business Valuation Guidelines (§4.48.4.2.3: the asset-based approach), https://www.irs.gov/irm/part4/irm_04-048-004; hand calculation in content.mdx: 900,000 − 350,000 = 550,000"
    },
    {
      "given": {
        "method": "revenue",
        "rev": 1250000,
        "rm": 0.65
      },
      "expect": {
        "value": 812500
      },
      "source": "IRS, Internal Revenue Manual 4.48.4 Business Valuation Guidelines (§4.48.4.2.3: the market approach), https://www.irs.gov/irm/part4/irm_04-048-004; hand calculation in content.mdx: 1,250,000 × 0.65 = 812,500"
    }
  ],
  "sources": [
    "IRS, Internal Revenue Manual 4.48.4, Business Valuation Guidelines, §4.48.4.2.3 Analyzing (the three generally accepted valuation approaches are the asset-based approach, the market approach and the income approach; select discount rates, capitalization rates or multiples consistent with the benefit stream). https://www.irs.gov/irm/part4/irm_04-048-004 (retrieved 2026-10-02)",
    "OpenStax, Principles of Finance, §11.2 Dividend Discount Models (DDMs) (constant growth model: value = D₀(1 + g) ÷ (r − g) = D₁ ÷ (r − g)). https://openstax.org/books/principles-finance/pages/11-2-dividend-discount-models-ddms (retrieved 2026-10-02)"
  ],
  "related": [
    "cap-rate",
    "npv",
    "gross-margin",
    "profit"
  ],
  "changelog": []
}