Finance Lab
Earnings multiple valuation
Value the business from its maintainable earnings and a chosen multiple.
Enterprise value = maintainable EBITDA × multiple. Equity value = enterprise value − debt + surplus cash.
Step 1 · Enter your figures
Every box starts with an example figure. Replace each one with your own — the result updates as you type. Nothing you type is sent anywhere or stored.
Annual earnings before interest, tax, depreciation and amortisation, after a market salary for the owner.
The multiple you are testing. Use the multiple evidenced by comparable transactions you hold.
Loans, overdrafts, finance leases and shareholder loans repayable on sale.
Cash not required to run the business day to day.
Step 2 · Read the result
Enterprise value
$2,000,000
- Equity value to owners
- $1,850,000
- Implied equity multiple
- 3.70×Equity value expressed against the same earnings figure.
- Equity value to owners$1,850,000
- Implied equity multiple3.70×
What this answer rests on (7)
- Maintainable EBITDA$500,000
You entered this
Annual earnings before interest, tax, depreciation and amortisation, after a market salary for the owner.
- Multiple applied4.00×
You entered this
The multiple you are testing. Use the multiple evidenced by comparable transactions you hold.
- Interest-bearing debt$200,000
You entered this
Loans, overdrafts, finance leases and shareholder loans repayable on sale.
- Surplus cash$50,000
You entered this
Cash not required to run the business day to day.
- The earnings figure is maintainable — it excludes one-off gains and losses and carries a market salary for working owners.
The calculator applied this
- The multiple is the one you entered. No multiple is supplied or suggested by the platform.
The calculator applied this
- Debt is repaid and surplus cash is retained at completion, which is the common cash-free debt-free basis.
The calculator applied this
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Save to my workspaceWhat this means for you
What a buyer paying a given multiple of your earnings would be paying for the business, and how much of that would actually reach you after debt is repaid.
How to read it
- Enterprise value is the price for the business itself, before any borrowings are settled.
- Equity value is what is left for the owners once debt is repaid and surplus cash is taken out. That is the number that matters to you.
- Change the multiple by half a turn and watch the equity value move — that gap is what negotiation is about.
Watch out for
- Earnings that still include your own under-market salary. A buyer will add a market salary back in and the value will fall.
- One-off income or costs left in the earnings figure. Maintainable means repeatable.
- Using a multiple you have heard rather than one evidenced by comparable sales in your industry and size band.
Assumptions behind this result
- The earnings figure is maintainable — it excludes one-off gains and losses and carries a market salary for working owners.
- The multiple is the one you entered. No multiple is supplied or suggested by the platform.
- Debt is repaid and surplus cash is retained at completion, which is the common cash-free debt-free basis.
General information only. This calculator does not take your circumstances into account and is not financial, tax, legal or investment advice. Confirm every rate, threshold and figure with your own adviser before acting.
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Other tools in value and ownership.
Take this further
Members run this calculator on their own recorded figures, save the workings to their workspace, export them to Word or Excel, and read the lessons that teach the thinking behind the result.