How to Use the DCF Formula for Startup Valuations

The Discounted Cash Flow (DCF) formula is used to estimate the value of a startup based on its expected future cash flows. Here's how you can use the calculator:

• Annual Revenue ($): Enter the current annual revenue of your startup.
• Growth Rate (%): Enter the expected annual growth rate of your revenue. This should be in percentage.
• Profit Margin (%): Enter the profit margin of your startup. This should also be in percentage.
• Discount Rate (%): Enter the discount rate. This rate is used to discount future cash flows to their present value.
• Number of Years: Enter the number of years you want to project into the future.

Click the "Calculate Valuation" button to get the estimated valuation of your startup based on the DCF formula.

Example

Let's assume the following values for your startup:

• Annual Revenue: $500,000
• Growth Rate: 10%
• Profit Margin: 20%
• Discount Rate: 12%
• Number of Years: 5

Using these values, the calculator will project the future cash flows for the next 5 years, discount them to their present value, and sum them up to estimate the startup's valuation.

How to Calculate Key Metrics

• Growth Rate (%): This can be calculated as ((Current Year Revenue - Previous Year Revenue) / Previous Year Revenue) * 100.
• Profit Margin (%): This is calculated as (Net Profit / Revenue) * 100.
• Discount Rate (%): The discount rate can be based on the cost of capital or desired rate of return. It reflects the risk of future cash flows.