Free business valuation (dcf) calculator
Enter your free cash flows, WACC, and terminal growth rate — this business valuation DCF calculator discounts future cash flows and adds a Gordon Growth terminal value to estimate enterprise value, updated live, as you type.
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Hypothetical projection. Excludes taxes, inflation, and fees. Actual investment returns vary.
Results are estimates. Consult a professional.
How the DCF business valuation calculator works
Discounted Cash Flow (DCF) valuation answers a simple question: what is a stream of future cash flows worth in today's dollars? The calculator projects free cash flow (FCF) over an explicit forecast period, discounts each year's FCF back to the present using the Weighted Average Cost of Capital (WACC), then estimates all cash flows beyond the forecast horizon as a Terminal Value using the Gordon Growth Model. The two components sum to Enterprise Value — the total economic value of the business.
DCF is highly sensitive to two inputs: WACC and terminal growth rate (g). A 1% change in WACC can shift enterprise value by 15–30% for a typical small business. The terminal growth rate should not exceed the long-run nominal GDP growth rate (~2.5–3% for U.S. businesses), because a company cannot grow faster than the overall economy indefinitely without becoming the entire economy.
Damodaran Online — NYU Stern School of Business, valuation data and methodologies.Worked example: $200k FCF growing 5%/yr at 10% WACC
A profitable regional distribution business generates $200,000 in free cash flow in Year 1, growing at 5% per year over a 5-year explicit forecast. The owner uses a 10% WACC (reflecting private-company risk) and a 2.5% terminal growth rate (matching long-run inflation). What is the estimated enterprise value?
DCF enterprise values by FCF and WACC
All figures below assume 5-year explicit FCF period with 5% annual FCF growth, followed by Gordon Growth terminal value at 2.5% perpetuity growth. Enterprise values scale linearly with Year-1 FCF. Small changes in WACC produce large swings in value — which is why WACC sensitivity analysis is essential for any serious business valuation.
| Year-1 FCF | WACC 8% | WACC 10% | WACC 12% |
|---|---|---|---|
| $100,000 | ~$2.0M | ~$1.4M | ~$1.1M |
| $250,000 | ~$5.0M | ~$3.6M | ~$2.8M |
| $500,000 | ~$9.9M | ~$7.2M | ~$5.7M |
Source: Calculator-s.cloud DCF model; Damodaran valuation methodology. Assumes 5-year projection, 5% FCF growth, 2.5% terminal growth.
Tips for DCF business valuation
DCF is only as reliable as its inputs. The model's greatest strength — discounting future cash flows at a risk-adjusted rate — is also its greatest weakness: small assumption errors compound dramatically over the forecast horizon. Professional appraisers typically cross-check DCF output against comparable company multiples (EV/EBITDA, Price/Revenue) to catch implausible results.
- Use free cash flow, not net income — Free cash flow (net income + depreciation − capex − change in working capital) is what a business actually generates in distributable cash. Net income includes non-cash items and ignores reinvestment needs, making it a misleading valuation input.
- Set WACC realistically for private companies — Public-company WACCs typically fall 8–12%. Private businesses add an illiquidity premium of 2–5%, pushing the effective WACC to 10–17%. Using a public-company WACC for a private business will overstate value significantly.
- Keep terminal growth at or below 2.5% — Terminal growth above long-run GDP (~2.5–3%) implies the company will eventually outgrow the entire economy. Conservative DCF models use 2–2.5%. A 0.5% increase in g can raise enterprise value by 15–20%.
- Run a sensitivity table — Value the business across a grid of WACC (±2%) and terminal growth (±1%) assumptions. The range of outputs shows you the valuation's inherent uncertainty and prevents false precision.
- Cross-check with market multiples — Compare your DCF output to industry EV/EBITDA multiples (typically 3–8× for small businesses; 6–15× for SaaS). If DCF gives $5M but comparable transactions trade at 4× EBITDA = $2M, investigate the discrepancy before relying on either figure.
Accuracy and limitations
DCF valuation is a framework for structured thinking about value — not a precise answer. The terminal value typically represents 60–80% of the total calculated enterprise value, meaning the vast majority of the result is driven by two assumptions (WACC and terminal growth) that are inherently uncertain. This model uses a simplified Gordon Growth terminal value and does not account for two-stage or three-stage growth models, mid-year discounting conventions, net debt adjustments to get from enterprise to equity value, minority interest or non-operating assets, or tax shield effects from leverage.
Not tax or financial advice. Business valuation for transactional purposes (M&A, estate planning, buyouts, litigation) requires a certified business appraiser (CBA or CVA designation). IRS and legal proceedings require defensible valuations prepared by qualified professionals under formal standards (USPAP, AICPA VS Section). This calculator is for educational and directional planning use only.
DCF valuation terms defined
About this DCF business valuation calculator
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