Accounting Business Valuation Calculator
Estimate a business valuation range using normalized EBITDA, selected valuation multiples and net debt.
Overview
This Accounting Business Valuation Calculator estimates a value range using annual revenue, normalized EBITDA, an EBITDA multiple range and net debt. It is useful for an initial view of what an accounting practice or other business may be worth before more detailed analysis.
How it works
The calculator multiplies normalized EBITDA by a lower and higher EBITDA multiple to produce an enterprise value range. Enterprise value represents the value of the operating business before financing. It then subtracts net debt to estimate equity value, which is the amount potentially attributable to shareholders. The midpoint is simply the average of the low and high enterprise value estimates after net debt is allowed for.
How to use this calculator
- 1Enter the business's annual revenue from its latest accounts.
- 2Enter normalized EBITDA after adjusting for unusual or non-recurring items.
- 3Choose a cautious and higher EBITDA multiple that suit the business and market.
- 4Add net debt, or enter a negative figure where the business holds net cash.
- 5Review the equity value range and compare it with relevant comparable transactions.
Example Calculation
Annual revenue
$1,000,000
Normalized annual EBITDA
$250,000
Low EBITDA multiple
3
High EBITDA multiple
5
Net debt
$100,000
Estimated midpoint equity value
$900,000
With normalized EBITDA of 250,000, a 3.0x to 5.0x multiple gives enterprise value of 750,000 to 1,250,000. After 100,000 of net debt, the estimated equity value range is 650,000 to 1,150,000, with a midpoint of 900,000.
Frequently asked questions
What is the difference between enterprise value and equity value?
Enterprise value estimates the value of the operating business before debt and cash. Equity value is enterprise value less net debt, so it represents the estimated value attributable to shareholders.
Why use normalized EBITDA for a business valuation?
Normalized EBITDA aims to show sustainable operating earnings by adjusting for one-off costs, unusual income and owner-specific expenses that may not continue after a sale.
What EBITDA multiple should I use?
The appropriate multiple depends on factors such as recurring revenue, client retention, growth, profitability, customer concentration, management depth and current market demand. A range is generally more useful than one fixed multiple.
Does annual revenue directly determine the valuation?
Revenue provides context and helps show the EBITDA margin, but this calculator values the business primarily from normalized EBITDA and the selected multiple.
Should cash be included in net debt?
Yes. Net debt is usually interest-bearing debt minus surplus cash. If cash exceeds debt, enter a negative net debt figure to reflect net cash.
Does this calculation include tax and transaction costs?
No. It does not include taxes, legal fees, advisory fees, working-capital adjustments or other transaction-specific costs.
Explore Related Calculators
Assumptions and warnings
Assumptions
- The valuation uses an EBITDA multiple approach and is an estimate, not a sale price guarantee.
- Normalized EBITDA reflects recurring operating performance after reasonable adjustments for exceptional or owner-specific items.
- Net debt is deducted from enterprise value to estimate equity value available to shareholders.
- The selected multiples are assumed to reflect the business's size, growth, customer concentration, risk and market conditions.
- Transaction fees, working-capital adjustments, taxes and deal structure are not included.
Warnings
- This calculator provides an estimate only and is not financial, accounting or investment advice.
- Actual business value can differ materially because of due diligence findings, buyer demand, contract terms and market conditions.