How to Use the Business Valuation Calculator

Instructions

The Will My Business Pay for My Retirement Calculator© makes use of an algorithm designed by professional business acquirers to determine the value of businesses they might target. It combines that with some basic principles of personal financial planning to give you an indication of whether the current value of your business will provide enough investable assets to cover your needs. This is represented by the Podolny Will My Business Pay for My Retirement Factor ©. 100% means that the value of your business is sufficient to provide for your financial independence. Over 100% means you have more than enough. Less than 100% means you do not have enough. Any percentage significantly less than 100% should be a call to action!

The information you input below is confidential. We won’t see it, and it won’t be saved.

 

Using the Calculator

You Will Need:

  • Your business financial statements for the last three years
  • A summary of what you spend personally annually

 

What to Do:

  1. Input all the information asked for in the yellow boxes.
  2. Certain calculations are made by clicking on the grey action boxes
  3. Results of these calculations show up in the green boxes
  4. When you are complete click on the ‘output’ box

widget-arrow-30px Click here for the calculator.

 

How to Interpret:

  • Real buyers most commonly use a multiple of cash flow- Income Before Interest, Taxes, Depreciation, and Amortization (IBITDA)- as their primary means of valuing a business.
  • Our calculator takes into account that you may pay yourself more than you would pay an outside manager to do your job and makes an adjustment to IBITDA.
  • 4 to 5 times IBITDA is the average range of purchase prices. We base your estimated Enterprise Value using the range between those.
  • Enterprise Value is further adjusted by adding back your cash and subtracting your debt
  • We then take out the estimated taxes that would be paid on the transaction leaving your with the Net Value Available to support your lifestyle
  • Based upon your desired lifestyle and personal income tax rate, we arrive at your pre-tax income needs
  • Then we calculate the investable funds necessary to cover those needs.
  • The relationship between what you need and what you have is represented in the Podolny Financial Independence Percentage.

 


 

Will Your Business Pay for Your Retirement? Find out how. Call us today at 505.856.2646 or click here to email.

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