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Valuation Calculator Explained

This page explains how we translate a small set of high-level inputs into a directional valuation range — before requesting documents or detailed financials.

This is not a formal appraisal. It is a transparent framework designed to help owners understand the logic behind valuation early and without pressure.

Back to the quick valuation →

Quick Valuation Methodology

Purpose-built to give sellers a directional range fast—then invite a real conversation.

This calculator is a calibrator, not an appraisal. It uses mainstream private-market heuristics to produce a directional enterprise value (EV) range from a few non-sensitive inputs in ~60–90 seconds.

Calculator Logic

ARR Path (Recurring models)

  • Start with a baseline revenue multiple ≈ 2.5×.
  • Adjust for EBITDA margin (efficiency premium) and growth trend (growing > stable > declining).
  • Clamp to a pragmatic private range 1.5×–6.0× ARR to avoid unrealistic outputs.
EV ≈ ARR × Adjusted_Multiple
Adjusted_Multiple = clamp( 2.5  +  f(margin)  +  g(growth) , 1.5 , 6.0 )

EBITDA Path (Non-SaaS SMBs)

  • Derive EBITDA from revenue via your selected margin band.
  • Apply an EBITDA multiple that varies with margin and growth, clamped around 2.5×–7.5×.
EV ≈ EBITDA × Adjusted_Multiple
Adjusted_Multiple = clamp( base  +  f(margin) + g(growth) , 2.5 , 7.5 )

Not an offer. Outputs are directional only and exclude cash/debt, taxes, and deal-specific adjustments.

Why These Ranges?

Private SaaS revenue multiples typically cluster below public comps. Using a cap near ~6× ARR keeps first-pass outputs grounded. For non-SaaS SMBs, EV/EBITDA in the low-to-mid single digits is a common shorthand for small private transactions across sectors; the clamp of ~2.5×–7.5× reflects that spread.

Why Margin & Growth Move the Number

  • Efficiency premium.

    Higher EBITDA margins (and “Rule of X/40” style efficiency) generally command higher revenue or EBITDA multiples.

  • Growth premium.

    Growing companies price above stable; declining trends earn a discount. Retention and revenue quality amplify these effects.

In the quick tool, “Growing” adds a modest bump; “Declining” trims it. Margin bands apply a simple linear nudge—just enough to differentiate outcomes without slowing completion.

Sources that Informed the Heuristics

  • Private SaaS valuation studies indicating private revenue multiples ~mid-single-digits with wide dispersion by growth/quality.
  • Public cloud benchmarks (efficiency metrics like Rule of 40/“Rule of X”) showing valuation premia for efficient growth.
  • Operator/financial surveys on growth and retention bands (e.g., GRR/NRR near ~90%/~100% medians across cycles).
  • Corporate-finance conventions (EV/EBITDA by sector) for non-SaaS SMBs to set practical clamps and sanity checks.

This page keeps sources high-level for clarity. In your “Research & Insights” area, you can link to specific whitepapers or data decks that underpin these heuristics.

What the Quick Tool Ignores (by design)

  • Balance-sheet effects. Cash/debt, working capital adjustments, taxes.
  • Granular revenue quality. Cohort NRR by segment, gross margin mix, revenue recognition nuances.
  • Concentration risk. Top-customer exposure, contract terms, churn shape.
  • Macro/credit conditions. Rate environment at LOI/close, lender appetite.

These belong in diligence and the investment model—not in a 60–90 second pre-intake.

How to Tighten the Estimate (Pro Mode)

  1. Net Dollar Retention band (<95%, 95–105%, >105%) → adjusts ARR multiple.
  2. CAC Payback band (<12, 12–24, >24 months) → trims/bumps multiple.
  3. Customer concentration (Top-3 % of revenue) → risk haircut.
  4. Cash/Debt bridge → convert EV to equity value.

Add these only if they don’t hurt completion. Default to the quick 3-step flow; reveal “Pro Mode” as an optional advanced panel.

Bottom Line

The tool mirrors mainstream shortcuts (ARR or EBITDA multiples), gently tilted by efficiency and growth, and clamped to conservative private-market ranges. It’s designed to build trust, set expectations, and start a deeper discussion—not to replace valuation work in diligence.

Next step Want a refined range based on your specifics?

Where your company fits in the buyer market

This visual tool shows which buyer types are most realistic for your business based on common acquisition requirements — not seller hopes or outlier outcomes.

Your company (estimates)

Est. EBITDA (TTM) $2.0M
EBITDA Margin 20%
Annual Growth Rate (CAGR) 8%
Customer Churn (TTM) 8%
Owner Dependence (hrs / week) 26–40

Buyer fit (directional)

Individual Buyer —%
Independent Sponsor —%
Lower Middle Market PE —%
Strategic Buyer —%
Where your company sits
Individual Sponsor PE Strategic

What this means

Based on the estimates you’ve entered, your company is currently closest to Independent Sponsors. That’s the buyer type most likely to lean in without needing heroic growth assumptions. Higher-bar buyers like larger PE funds or strategics typically expect stronger scale, growth, or lower owner dependence than what’s shown here.

Sources & assumptions: Industry transaction data (Axial, Pepperdine Capital Markets Report), sponsor underwriting norms, private-market EBITDA multiples, and observed buyer requirements across SMB and lower middle market deals. Outputs are directional only — not offers.

Which deal structure actually matches how you want to exit?

Adjust the sliders to reflect how much cash you want at closing, how comfortable you are with notes, earn-outs, and rollovers, and how long you’re willing to stay involved. We’ll show which structure is likely the best directional fit.

Your preferences

Cash needed at close 70%
Comfort with seller note / deferred payments 30%
Comfort with performance-based earn-out 20%
Comfort rolling equity into the new entity 10%
How long are you willing to stay involved? Advisory (6–24 months)

This is illustrative, not a quote. In practice we’d work from your financials and specific goals to design the actual term sheet.

Deal structure match (directional)

We compare your preferences against four common SMB deal patterns and highlight which one is likely the most natural fit for you.

1. Mostly cash at close
–%
Cleanest structure: high cash at closing, minimal seller note, little to no earn-out or rollover. Best if you want to de-risk and move on quickly.
2. Cash + seller note
–%
Meaningful cash at close plus a fixed payment schedule over time. Often improves valuation and terms in exchange for some deferred risk.
3. Cash + rollover equity
–%
Take chips off the table now and keep a minority stake in the new entity. You benefit if the next chapter compounds value over time.
4. Cash + earn-out
–%
Portion of the price is tied to hitting agreed-upon performance targets. Strong fit if you believe in near-term upside and are willing to stay engaged.
Where this leans based on your inputs
YOU
Mostly cash
at close Cash +
seller note Cash +
rollover Cash +
earn-out

What this means

Adjust the sliders to see which deal pattern your preferences lean toward. We’ll interpret the match here in plain language so you can sense whether the structure lines up with how you actually want to exit.

Sources & assumptions: This reflects common patterns in lower-middle-market and SMB transactions (SBA-backed deals, independent sponsors, and buy-and-hold buyers). It’s meant to help you understand trade-offs between cash at close vs. notes, rollovers, and earn-outs — not to provide legal, tax, or investment advice.

Balance Sheet Snapshot

Quickly compute Operating NWC (ex-cash), Net Debt, and capture PP&E (FMV) for use in the other calculators.

Current Assets

Operating NWC excludes cash.

Current Liabilities

Net Debt = (CPD + LTD) − Cash.

Calculated

Operating NWC (ex-cash)
$0
Net Debt
$0
PP&E (FMV)
$0

We auto-store these in your browser for the other tools and dispatch a “gh:balanceSheetUpdated” event.

Reality-check a growth idea

Model how a headline growth claim is tempered by time value (DCF), execution risk (probability of success), and the real cost to achieve it.

Seller’s claim at future realization (e.g., “+ $10M in 3 years”).
15%
60%

Other Assets Estimator

Estimate the value of real estate, equipment, patents/IP, and other hard assets using conservative screening assumptions.

RE Real Estate

Equity ≈ (Value × (1 − liq − costs)) − debt.

EQ Equipment

Value ≈ RCN × max(0, 1 − Age/Life) × Condition × (1 − liq) − debt.

IP Patents & IP

Relief-from-royalty: Rev × RR × AnnuityFactor(discount, years) × (1 − haircut).

OH Other Hard Assets

Name
Gross ($)
Haircut %

Net = Gross × (1 − haircut).

Goodwill Calculator

Estimate goodwill as the residual between Enterprise Value and identifiable net assets at fair value. For illustration only—final allocation is set by a formal PPA.

EV Enterprise Value

EV = EBITDA × Multiple. Equity value (context) = EV − Net Debt.

INA Identifiable Net Assets (Fair Value)

INA ≈ Working Capital delivered + PP&E (FMV) + identifiable intangibles (if known).

GH
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