Capitalised Earnings Approach Calculator
Capitalised Earnings Approach Calculator Explained:
(a) What is this? A valuation for a business using the Capitalised Earnings method.
(b) What does this tell me? In theory what your business is worth using this method.
(c) Why should I use it? To get a valuation for your business using just a few inputs. To illustrate how the Required ROI works, consider the element of risk. A very low risk investment (money in the bank) would yield say 4% interest. As most businesses carry a risk significantly greater than this the number grows. Smaller businesses would have an ROI of between 20% - 50%, larger businesses with lower risk would have an ROI of between 15% and 20%. Wages are included and "Fair market value" for the owner/managers wages to run the business.
(d) Caution: A business, is like anything, it all depends what someone wants to pay for it. A valuation is not necessarily representative of what will be achieved at the time of sale of a business. Any decisions you make, or don't make should be with the assistance and advice of your accountant or trusted financial advisor. You use this calculator at your risk.