What are your shares actually worth?

Your shares are worth whatever someone would pay for them today — which, for most startups, is significantly less than founders think.

Owning 30% of a company sounds great. But 30% of what? If your company has no revenue, no assets, and no realistic path to acquisition, 30% of nothing is nothing. If your company does $500K in annual revenue but operates in a space with 1x revenue multiples, your 30% is worth roughly $150K — before discounts for illiquidity, minority stake, and the fact that nobody is actually offering to buy it.

This post is about putting a real number on your equity. Not a fundraising number. Not a “what we could be worth someday” number. A grounded estimate of what your shares would trade for if you had to sell them today.

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Why most founders overvalue their equity

Founders confuse two different numbers: what the company could be worth and what someone would pay for it right now.

The first number lives in pitch decks. It’s built on projections, TAM slides, and comparable exits. The second number is what matters when a co-founder wants to leave, when you’re dividing equity among contributors, or when you’re deciding whether to take a salary cut in exchange for more ownership.

The gap between these numbers is enormous for early-stage companies. A pre-revenue startup with a $5M valuation on its last SAFE isn’t worth $5M. That SAFE cap reflects what an investor might get if everything goes right. The company’s actual value today — what you could sell it for in an arm’s-length transaction — is a fraction of that.

Equity is only wealth on paper until someone writes a check for it.

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Revenue multiples by business type

The most common way to estimate a small company’s value is to apply a revenue multiple. What multiple you use depends almost entirely on your business type.

Business type	Typical revenue multiple	Why
Service agency (design, dev, marketing)	0.5x - 1.5x annual revenue	Revenue depends on founder involvement, hard to transfer
Freelance/consulting practice	0.25x - 0.75x	Almost entirely tied to the individual
E-commerce (product-based)	1x - 3x	Depends on brand strength and repeat customers
Local/brick-and-mortar	1x - 3x SDE	Usually valued on seller’s discretionary earnings
Content/media business	2x - 4x	Depends on traffic diversification and monetization
SaaS (early, <$1M ARR)	2x - 5x ARR	Recurring revenue, but small scale adds risk. Below $500K ARR, expect the lower end.
SaaS (growing, $1M-$10M ARR)	6x - 12x ARR	Depends heavily on growth rate and retention
SaaS (scaled, $10M+ ARR)	8x - 15x+ ARR	Premium for proven unit economics
Marketplace	3x - 8x net revenue	Network effects command higher multiples
Hardware/physical product startup	1x - 3x	Capital-intensive, lower margins

These ranges are broad because they depend on dozens of factors: growth rate, margins, customer concentration, churn, market size, defensibility. A SaaS company growing 100% year-over-year with 95% net retention commands a very different multiple than one growing 20% with 85% retention.

The SDE vs. revenue distinction

For smaller businesses (under $2-3M revenue), buyers often value on seller’s discretionary earnings (SDE) rather than revenue. SDE is your net profit plus the owner’s salary plus any personal expenses run through the business. A business doing $800K in revenue with $300K in SDE might sell for 3x SDE ($900K), which works out to about 1.1x revenue. The multiple on SDE looks higher, but the dollar outcome is what matters.

For larger businesses and especially SaaS, revenue multiples (or ARR multiples) become the standard because buyers are valuing the revenue stream, not current profitability.

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The discount stack: why your equity is worth less than the math suggests

Even after applying the right revenue multiple, the actual value of your shares is lower than your percentage of that enterprise value. There are several layers of discounts.

Minority discount (15-30%)

If you own less than 50%, you can’t force a sale, replace management, or make strategic decisions. Buyers of minority stakes pay less because they’re buying influence, not control. A 20% stake in a $2M company isn’t worth $400K — it’s worth $280K-$340K after the minority discount.

Illiquidity discount (20-40%)

Private company shares can’t be sold on an exchange. Finding a buyer takes time, negotiation, and legal work. The harder it is to sell, the less your shares are worth today. This is the same concept as the DLOM applied in 409A valuations.

Key-person risk

If the business depends heavily on one or two people (common in agencies, consulting firms, and early startups), a buyer assumes significant risk that the value walks out the door after acquisition. This further depresses what someone will pay for a stake.

Liquidation preferences

If you’ve raised outside capital, investors typically hold preferred stock with liquidation preferences. A 1x preference means the investor gets their money back before common shareholders see a penny. If an investor put in $2M with a 1x preference and the company sells for $4M, the investor gets $2M off the top. The remaining $2M is split among common shareholders. Your 30% of the company isn’t 30% of $4M — it’s 30% of what’s left after preferences are satisfied.

No market = no price

For most startups, there is no liquid market for your shares. The “secondary markets for startup equity” that exist are limited to late-stage companies with brand recognition. For a seed-stage company, your shares are worth what they’re worth only when an exit event happens. Until then, the value is theoretical.

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Putting a dollar value on dynamic equity

If you’re using a dynamic equity model to track co-founder contributions, you might wonder what all those tracked hours and contributions translate to in actual dollars.

The honest answer: in the early days, the dollar value per share is close to zero. The value of tracking contributions isn’t that each hour is worth X dollars today. It’s that when the company does become valuable, ownership is distributed proportionally to who actually built it.

That said, it’s useful to think about the future dollar value of equity when making decisions like:

• Should I take a lower salary in exchange for more equity?
• Is it worth bringing on a co-founder for 20% if they’ll accelerate our path to revenue?
• Should I keep freelancing at $150/hour or go full-time on this startup for equity?

A framework for thinking about equity value

Here’s how to estimate what your equity could be worth:

Step 1: Estimate a realistic exit value for your business. Not the dream scenario. The median outcome for a company like yours. For most small startups, this is an acqui-hire ($1-3M) or a small acquisition (1-3x revenue at the time of sale).

Step 2: Apply your ownership percentage.

Step 3: Discount for probability. Most startups fail. If you’re pre-revenue, maybe there’s a 20% chance of any meaningful exit. Post-revenue and growing, maybe 40-60%.

Step 4: Discount for time. An exit 5 years from now is worth less than cash today. A reasonable discount rate for a startup is 30-50% annually (reflecting the extreme risk).

Example: You own 25% of a SaaS startup doing $200K ARR, growing steadily.

• Realistic exit in 3 years at $2M ARR, selling at 5x = $10M
• Your 25% = $2.5M at exit
• Probability of reaching that outcome: 40% = $1M expected value
• Discounted back 3 years at 35%: ~$400K present value

That’s a very rough estimate, but it gives you a framework. Your 25% stake is “worth” something in the range of $400K in expected present value terms. Compare that to what you’d earn in salary over the same period and you can make an informed decision about the equity-vs-cash tradeoff.

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When equity is worth more than the math says

The numbers above are conservative by design. There are situations where equity is worth more than a pure financial analysis suggests.

You’re the operator. If you’re an active founder (not a passive shareholder), you control the outcome. You can work harder, pivot faster, and make decisions that increase the value. Passive investors price in the risk that management screws up. You are management.

Optionality. Equity in a growing business gives you options: raise funding, sell the company, take distributions, or keep growing. A salary gives you one thing. Equity gives you a portfolio of possible outcomes, some of which are asymmetrically large.

Tax advantages. Long-term capital gains rates (currently 0-20%) are significantly lower than income tax rates (up to 37%). A dollar of equity gains is worth more after tax than a dollar of salary. If your shares qualify for QSBS treatment, the first $10M in gains could be tax-free. If you hold ISOs, use our ISO tax calculator to model the actual tax impact.

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When equity is worth less than you think

The company needs you to succeed, but you don’t need the company. If you have high-demand skills (engineering, sales, specialized expertise), your next-best alternative is a high salary at an established company. The opportunity cost of working for equity is real and often underweighted.

Revenue depends on one person. If the business is essentially a personal brand or solo practice, it doesn’t transfer well. Your “30% of the company” is really 30% of a business that might not survive your departure. This is the same problem that creates dead equity — ownership that no longer corresponds to active contribution.

There’s no path to liquidity. Some businesses are great lifestyle businesses but terrible equity investments. A profitable agency doing $1M in revenue with 30% margins is a fantastic business to own and operate. But if you hold a minority stake and there’s no plan to sell or distribute profits, your equity might never convert to cash.

Dilution ahead. If the company plans to raise multiple rounds of funding, your 25% today might be 8% at exit. Model the dilution before celebrating your ownership percentage. Check out our guide on what investors look for in cap tables for context on how funding rounds affect founder ownership.

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How to talk about equity value with co-founders

Equity conversations get awkward when co-founders have different assumptions about what the company is worth. One person thinks their 30% is worth $500K; the other thinks the whole company isn’t worth $500K. Here are some grounding principles:

Agree on the basis. What revenue multiple is appropriate for your business type? What discount rate reflects the risk? Get on the same page about the framework before debating specific numbers.

Use comparable transactions. What have similar companies actually sold for? Not raised at — sold for. Acquisition prices are harder to find than funding announcements, but sites like MicroAcquire (now Acquire.com), FE International, and Flippa publish sale prices for small businesses. These are the real numbers.

Separate current value from potential value. Your shares are worth X today and might be worth Y in the future. Both numbers are relevant, but for different decisions. Current value matters for buyouts and departures. Potential value matters for deciding whether to keep investing your time.

Track contributions, not just percentages. If you’re using Equity Matrix to track contributions dynamically, the conversation shifts from “what is my percentage worth” to “what have we each put in, and how does that map to future outcomes.” This is healthier because it’s grounded in observable reality rather than speculative valuations.

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The bottom line

Your equity is worth what someone will pay for it, discounted by how likely that transaction is and how long you’ll wait for it. For most early-stage founders:

• Pre-revenue: Your equity has near-zero current value but potentially significant option value. The contribution tracking is more important than the dollar value.
• Early revenue ($100K-$500K): Apply conservative multiples for your business type. Your equity is probably worth less than a year’s salary at a tech company.
• Growing revenue ($500K-$2M+): Now the math gets interesting. Revenue multiples, growth rates, and retention metrics start telling a real story about what the business could sell for.
• Profitable and distributing: Equity has real present value because you’re receiving actual cash flow. Value the distributions as an income stream, plus the option value of a future sale.

The point isn’t to discourage people from pursuing equity. It’s to make the decision clear-eyed. When you understand what your shares are actually worth, you can make better decisions about how to split equity, whether to take salary or ownership, and when it’s time to convert your dynamic split to a formal cap table.

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Frequently asked questions

How do I value my equity if the company has no revenue?

Pre-revenue equity is extremely difficult to value with precision. The most honest answer is that it’s worth close to zero in current liquidation terms, but has option value based on the probability of future success. If you need a number for decision-making, estimate a realistic exit scenario, apply your ownership percentage, discount for probability (80%+ of startups fail), and discount for time. The result will be much smaller than your “percentage times last valuation cap” would suggest.

Do revenue multiples apply to bootstrapped companies the same way as VC-backed ones?

Yes, but the applicable multiples are often lower. VC-backed companies are typically optimizing for growth over profitability, which commands higher revenue multiples when growth rates are strong. Bootstrapped companies tend to optimize for profitability, which means they’re often valued on SDE or EBITDA multiples rather than pure revenue multiples. A bootstrapped SaaS doing $2M ARR at 40% margins might sell for 4-6x ARR, while a VC-backed one growing faster might command 8-12x.

My co-founder wants to leave. How do I value their shares for a buyout?

Use the framework in this post: apply an appropriate revenue multiple for your business type, then apply a minority discount and an illiquidity discount. Be fair but realistic. If the business is pre-revenue, the shares might legitimately be worth close to zero in cash terms — which is why vesting and co-founder agreements that address departure scenarios are so important to set up early.

Does Equity Matrix help me see the dollar value of my shares?

Equity Matrix tracks contribution-based ownership — the relative percentages based on what each person has put in. The dollar value of those percentages depends on the company’s overall value, which changes over time as the business grows. The tool helps you answer “what percentage do I own and why” with precision. The question of “what is that percentage worth in dollars” requires the kind of business valuation analysis covered in this post.

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Trying to figure out what a fair split looks like before you know what the company is worth? Start tracking contributions with Equity Matrix — fair ownership is easier to agree on when it’s based on what people actually contribute.