Acquisition payback period & IRR calculator
Model the return on an online business acquisition — payback period, 3-year IRR, and a year-by-year cash flow breakdown.
Enter the purchase price, current monthly profit, and an expected annual growth rate. The calculator models payback, IRR, and year-by-year cash flows assuming you sell at the end of year 3 at the same monthly multiple you paid.
Acquisition payback and IRR calculator inputs and results
Year-by-year cash flows
| Year | Annual profit | Cumul. earnings |
|---|
Sale proceeds assume exit at the same monthly multiple as the purchase price.
How this calculator works
Payback period is computed month by month: each month's profit grows from the current monthly figure at the entered annual growth rate, and the running total is compared to the purchase price. The month where cumulative earnings first exceed the purchase price is the payback period. This is an undiscounted measure — it doesn't account for the time value of money, but it captures the most intuitive risk question: how long until I've earned my money back?
The 3-year IRR is solved from four cash flows: the purchase price as a negative outflow today, annual profits in years 1, 2, and 3, and an estimated exit price at the end of year 3. The exit is modelled at the same monthly multiple as the entry price — if the business has grown, the absolute exit price will be higher. IRR is the discount rate that makes the net present value of those four flows equal to zero.
Use the SDE valuation calculator to estimate a fair purchase price before running this model.
About this tool
This tool models the return on buying an online business. Inputs: purchase price, current monthly net profit, and expected annual growth rate. Outputs: implied purchase multiple, payback period in months, 3-year IRR (assuming a sale at the same monthly multiple), and a year-by-year cash flow table showing annual profits and cumulative earnings.
Frequently asked questions
What does payback period measure?
Payback period is the number of months until cumulative profits from the business equal the purchase price — in other words, when you've earned back what you paid. It's an undiscounted measure that ignores time value of money, but it's how most buyers intuitively think about risk. Most experienced buyers target under 36–48 months; beyond 60 months the deal requires high confidence in growth to justify the risk.
How is the 3-year IRR calculated?
The IRR is solved from four cash flows: the purchase price as a negative outflow at year 0, annual profits in years 1, 2, and 3 (growing at the entered rate), and an estimated sale price at the end of year 3. The sale price assumes you exit at the same monthly multiple you paid — so if the business has grown, the absolute price is higher. If you expect multiple expansion at exit, the actual IRR will be better than shown.
What is a monthly multiple?
The monthly multiple is purchase price divided by current monthly net profit. It's the standard metric used by online business brokers and marketplaces — a $400,000 business earning $8,000/month trades at a 50× monthly multiple (roughly 4.2× annual). Typical ranges: 30–50× for stable content and ecommerce, 40–70× for growing SaaS.
Why does growth rate have such a large effect on IRR?
Growth compounds in two ways simultaneously. It increases the annual profits you receive each year, and it increases the terminal value when you sell — because you're selling at the same multiple on a higher earnings base. Even a modest 10–15% annual growth rate dramatically improves IRR because the terminal value is a large share of total return in any business acquisition.