The Business Valuation Calculator helps you determine the resale value of your business. This will help you identify the areas where your business needs to improve in order to increase it value to potential buyers or investors..
How to calculate business valuation
In order to determine the value of your business, you will need several key metrics including gross annual revenue, annual profit, customer life time value (LTV), customer acquisition cost (CAC), growth rate as a percentage, churn rate as a percentage, and other key information.
These are the numbers potential buyers or investors will use to evaluate the business and determine the overall risk and return potential.
While this calculator is not comprehensive, and may not cover all industries or business models, it’s a great starting point for you to understand the overall factors that affects a businesses resale value in the market.
We will look at all the factor involved in more details, so that you have a clear idea of what they mean, why they are important, and tips on how you can improve each one.
How to determine Customer Acquisition Cost (CAC) for your business
To get a customer often requires spending some time or money. While your time may be free, spending too much of it to acquire a customer will quickly feel too costly. Because in the back of your mind you know the value of your time.
When using capital to finance sales and marketing, you must find what that final cost to pull a customer in will be as soon as possible. This is often done with small budget experiments, pricing surveys, and competitive research.
CAC is usually calculated on a monthly or quarterly basis across pretty much all business models. This helps determine how many months of revenue or total revenue from sales to earn back the acquisition cost. It is often compared to LTV (total lifetime value/revenue from customer). A good LTV to CAC ratio is 3:1. Meaning for every dollar you spend on getting the customer, you earn $3 over some specific period being tracked.
The CAC formula:
CAC = Total Sales & Marketing Expenses / Number of New Customers Acquired. Total spend divided by number of customers.
It is imperative that you find this number as soon as possible. The CAC will help you calculate profits, business value, and reveal where budget optimization needs to happen.