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What return will you earn on the cash you invest? And how fast you would earn it back.
Enter the deal and the calculator handles the loan math, showing the yearly cash return on the money you put in and your payback period.
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Business Calculators / Cash-on-Cash Calculator
Cash-on-Cash Calculator
Yearly return on the cash you invest.
Time to earn back your cash.
How it is calculated
Related
The Debt Service Coverage Calculator checks whether a lender would fund the deal, and the ROI Calculator measures the return on the full purchase price.Closing costs and working capital are estimated at 3% and 5% of the price. Results reflect operating cash flow only, before taxes and any proceeds from a future sale. Not financial advice.
Cash-on-cash return measures the yearly cash a business puts in your pocket compared with the cash you actually invested to buy it. Because it focuses on your out-of-pocket money rather than the full price, it is the measure buyers reach for first when financing is involved, and a fast way to compare one deal against another.
Enter the asking price, your down payment, the business's cash flow and a market wage for whoever runs it. The calculator handles the loan math, estimating your closing costs, working capital and yearly loan payments, then shows your yearly return and the payback period, so you can see how hard your money would work.
Questions
Cash-on-Cash Calculator: frequently asked questions
What is cash-on-cash return?
The yearly pre-tax cash a business produces for you, relative to the cash you personally put in: annual cash flow / cash invested. A 25% return means $25 a year for every $100 you invested.
How is it different from ROI?
ROI measures the return on the full price as if you paid cash. Cash-on-cash measures the return on only your cash, after loan payments, so financing usually makes it higher.
What is a good cash-on-cash return?
For leveraged small business deals, 20% to 40% is a common range. Higher is possible but usually comes with more risk.
Why subtract an owner replacement salary?
So the return reflects owning the business, not working in it. Your salary is pay for your time.
What counts as total cash invested?
Your down payment plus closing costs and the working capital you put in to run the business. We estimate the last two at 3% and 5% of the price.
How does financing change my return?
Borrowing more means less cash in and a higher percentage return, but bigger loan payments and less room for a bad year. Test it against the Debt Service Coverage Calculator.
What is the payback period?
How many years of cash flow it takes to earn back the cash you put in: cash invested divided by yearly cash flow to you.
Is a high cash-on-cash return always good?
No. A very high return often means heavy leverage, and leverage cuts both ways if cash flow drops.
Does it account for taxes or a future sale?
No. It is pre-tax and covers operating cash flow only.
Is this financial advice?
No. It is an educational estimate.
Next Step
Put these numbers to work on a real deal.
Buyer's EDGE is free: save target businesses, model each deal in the Acquisition Center and learn the process in Acquisition Academy. Selling? The Seller Portal starts a confidential sale. Either way, an EDGE advisor can help from the first conversation through closing, financing included.