Succession

Valuation Discount Calculator (Minority + Marketability)

A quarter of a company is almost never worth a quarter of the company. Two discounts sit between the two numbers — one for not controlling anything, one for not being able to sell — and they compound rather than add. This applies both, shows the arithmetic, and puts a model-based marketability figure next to the one you entered.

Inputs

  • Controlling-interest value of the whole company
  • Interest being valued
  • Discount for lack of control
  • Discount for lack of marketability
  • Volatility of the underlying value — Used only for the model comparison — private operating companies are often modelled at 30–70%.
  • Expected time until a liquidity event
  • Risk-free rate

How to use this calculator

  1. Enter the value of the whole company on a controlling, marketable basis: the number an appraisal or a whole-company sale would produce.
  2. Enter the percentage interest being valued: the block being gifted, redeemed, or bought out.
  3. Enter a discount for lack of control. It reflects what the holder cannot do, such as set distributions, hire and fire, or force a sale, so it depends on the operating agreement and not just the percentage.
  4. Enter a marketability discount for the fact that no one can readily buy this interest.
  5. Read the combined discount. It is multiplicative: 20% and 30% is 44%, not 50%. The additive row shows what the shortcut would have cost.
  6. Set a volatility and a holding period to see the put-model indication next to your entered figure. Treat a large gap as a prompt to document your reasoning, not as proof either number is wrong.
  7. Take the result to a qualified appraiser before it is used for tax, a buy-sell, or a court filing. Discounts are the most litigated numbers in private-company valuation.

What each term means

Controlling-interest value
What the whole company is worth to a buyer who would control it: the starting point here.
Pro-rata value
The interest percentage multiplied by the whole-company value, before any discount. Almost never what a minority block is worth.
DLOC (discount for lack of control)
A reduction reflecting that a minority holder cannot direct distributions, compensation, or a sale.
DLOM (discount for lack of marketability)
A reduction reflecting that the interest cannot be readily sold: no market, no ready buyer, no quick exit.
Multiplicative discounts
Discounts applied one after the other to a shrinking base, so they compound instead of adding.
Chaffe put model
Treats marketability as the cost of a put option that would let the holder sell at today's price after the lock-up. One of several competing DLOM methods.
Volatility
How much the underlying value swings year to year, expressed as an annual percentage. It drives the option-based DLOM indication.

Educational disclaimer: Outputs are simplified educational estimates built from the numbers you enter — they are not financial, legal, tax, or investment advice, and real decisions deserve verified figures and qualified professionals.

Succession & Estate