The Value of Your Business

Business Information

Your current year income, before interest, taxes, depreciation, and amortization are deducted.

The amount of compensation over and above what a non-owner/manager would be paid for doing the same type of work.

The annual rate at which you expect your earnings to grow, either as a result of increased sales, profitability or a combination of the two.

Years of earnings

The number of years of projected earnings you would like to use to determine your business value.

Cost of capital

The interest rate that an investor would require in order to invest money in your business. This rate typically between 12% to 25% and may be even higher for a small busines.

Marketability discount

The discount that is often placed on a business when the ability to convert an investment into cash quickly at a known price and with minimal transaction costs is restricted by market conditions.

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The Value of Your Business
Cumulative Earnings	Cost of Capital	Present Value of Earnings	Discounted Value

While there are potentially many ways to value a business, one traditional method is using the discounted, or present value, of your estimated cash flow. This method takes your current income, before income, taxes, depreciation and amortization and projected income for a defined number of years and determines the present value of that income, based on the cost of capital. Some businesses are less valuable because of their marketability, and as a result, a discount is often applied to reflect the difficulties that may be encountered when trying to sell the business. Keep in mind that this method does not include the value of your companies assets, only its ability to produce income.

This calculator is intended for informational purposes only and is considered an estimate. The accuracy of this calculator is not guaranteed by General Electric Credit Union (GECU). The calculator and its results do not constitute the advice of, or reflect actual products, services, rates, and/or terms available. Nothing contained in the calculator shall constitute an offer or solicitation of a product or service by GECU. This calculator is not intended to offer any tax, legal, financial, or investment advice. Please consult with qualified advisors to discuss your specific needs.

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