Whitepaper
Calculator
Methodology
The assumptions, formulas, and thinking behind the A-Corp Calculator — and why we believe creative practices can be valued as businesses.
Executive Summary
The A-Corp Calculator models what a creative practice looks like when treated as a real business — with revenue, payroll, benefits, intellectual property, and equity. It produces a valuation, projects growth, and compares wealth outcomes for artists under the traditional model versus the A-Corp model.
This document lays out every assumption behind the calculator. Our goal is full transparency: if you disagree with an assumption, you should be able to see exactly where it sits and what changing it would mean.
Valuation Framework
The calculator produces a “current valuation” using three components. This is not a market valuation or an appraisal — it's a modeling tool to help artists think about their practice as an asset with measurable value.
Core Formula
Current Valuation = Revenue Multiple + Catalogue Value + Brand Value
1. Revenue Multiple (1.0×)
Formula: Total Annual Revenue × 1.0
We apply a 1× revenue multiple to the artist's total annual income. This is deliberately conservative. For context, SaaS companies trade at 5-15× revenue. Media companies at 2-4×. Service businesses at 1-3×.
A 1× multiple says: your business is worth at least one year of its revenue. For most creative practices with recurring income (touring, licensing, client work), this is a floor, not a ceiling.
Assumption: Revenue is annualized from all sources. The user inputs each stream individually (touring, streaming, merchandise, commissions, licensing, etc.) and the calculator sums them.
2. Catalogue Value (User-Defined)
Formula: Direct user input
The value of existing intellectual property — a song catalogue, a body of visual work, a film library, a book backlist. This is the hardest number to estimate and the most variable across disciplines. We let the user define it rather than imposing a formula.
For music catalogues, recent transactions suggest multiples of 10-30× annual royalties. For other disciplines, the market is less established, which is part of the problem the A-Corp aims to solve.
Assumption: The user has the best sense of their IP's value. The calculator also tracks number of works as a reference point, but does not auto-calculate catalogue value from it.
3. Brand Value (25% of Revenue)
Formula: Total Annual Revenue × 0.25
Brand value captures the intangible asset of an artist's reputation, audience, and name recognition. A 25% premium over revenue is conservative — brand consulting firms typically value brands at 1-5× revenue for consumer-facing businesses.
We use 25% because many early-career artists are still building their brand, and we want the calculator to feel credible rather than aspirational. For established artists, real brand value is significantly higher.
Assumption: Brand value scales linearly with revenue. In practice, brand value likely grows faster than revenue (network effects, audience compounding), but we keep it simple.
Growth Projections
Projection Formula
Year N Valuation = Current Valuation × (1 + Growth Rate)N
The calculator projects valuations at 1, 3, 5, and 10 years using compound growth. The default growth rate is 10% annually, which the user can adjust.
At 10% growth, a practice valued at $75,000 today would be projected at:
Year 1
$82,500
Year 3
$99,825
Year 5
$120,788
Year 10
$194,531
Assumption: Growth compounds annually on the full valuation (revenue, IP, and brand all grow together). In reality, different components grow at different rates. We use a single rate for simplicity and let users adjust it. The default of 10% is roughly in line with the growth rate of the median US small business.
Payroll & Benefits
The calculator models each team member with a salary and benefits level, reflecting the reality that A-Corps can employ people and provide group benefits.
Benefits Tiers
Full
$1,800/mo
$21,600/yr per person
Basic
$900/mo
$10,800/yr per person
None
$0/mo
$0/yr per person
Insurance Savings Model
We model the cost of individual health insurance at $10,000 per year per person — roughly the average cost of an individual plan purchased on the open market. The calculator then compares this to the cost of group coverage through the A-Corp.
Savings Formula
Insurance Savings = max(0, Individual Cost − Group Cost)
Where Individual Cost = Members with benefits × $10,000/year
Assumption: $10,000/year is an average for individual ACA marketplace plans. Actual costs vary significantly by state, age, and plan level. Group plans through an A-Corp would typically cost 10-30% less than individual plans for equivalent coverage.
Key Calculations
Total Payroll
Sum of all members' (Salary + Monthly Benefits × 12)
Net Income
Total Revenue − Total Payroll
Benefits Health Check
Benefits Cost ÷ Total Revenue × 100 — warns if above 10%
Traditional vs. A-Corp Model
The most powerful output of the calculator is the 10-year wealth comparison. It models the difference between how artists earn today and how they could earn as an A-Corp.
Traditional Model
Annual Compensation
Revenue × 15%
10-Year Wealth
Annual Comp × 10
Equity
$0 — no ownership stake
A-Corp Model
Annual Compensation
Founder's salary (set by artist)
10-Year Wealth
(Salary × 10) + (Year 10 Valuation × Ownership %)
Equity
Real ownership in a growing asset
The 15% figure in the traditional model represents the typical share of revenue that flows to the artist in conventional industry arrangements — after managers (15-20%), agents (10%), lawyers (5%), labels or publishers (50-85%), and other intermediaries take their cuts. It's a rough average across music, publishing, and visual arts.
The A-Corp model shows what happens when the artist owns the entity generating the revenue. Instead of capturing 15%, they set their own salary, build equity, and own an asset that compounds in value over time.
Assumption: The 15% traditional figure is an average. Some artists capture more, some less. The calculator allows users to set their own salary in the A-Corp model, so they can model their specific situation.
Ownership Model
The calculator tracks ownership distribution across all team members and enforces the A-Corp's core governance rule: artists must hold at least 51% of voting power.
Each team member is tagged as either an “artist” or a non-artist (manager, producer, business partner, etc.). The calculator sums ownership percentages for all artist-tagged members and displays a warning if artist ownership drops below 51%.
This isn't just a calculator feature — it's a core provision of the proposed A-Corp law. The 51% rule ensures that creative decisions always remain with the people doing the creative work, even as the company grows, takes on investors, or brings in non-artist team members.
Assumption: “Artist” designation is self-reported by the user. The law would define “artist-member” more precisely. The calculator defaults to the founder holding 100% ownership and being tagged as an artist.
Default Values & Limitations
Default Values
Known Limitations
- No tax modeling. The calculator does not account for income tax, self-employment tax, or the tax advantages of specific structures (e.g., S-Corp payroll tax savings). This is a significant factor in real-world decisions and we plan to add it.
- Linear brand value. Brand value is modeled as a fixed percentage of revenue. In reality, brand value compounds non-linearly and is influenced by factors beyond revenue.
- Single growth rate. All valuation components grow at the same rate. In practice, IP might appreciate differently than active income.
- No expense modeling. Beyond payroll and benefits, the calculator doesn't account for operating expenses (studio rent, equipment, travel, materials).
- Static benefits costs. Health insurance costs are modeled as fixed, but they increase annually (typically 5-7%).
- No discount rate. Projected valuations are not discounted to present value. A dollar in year 10 is worth less than a dollar today.
Why This Matters
Artists have never been asked to think about their work as a business with a valuation. That's not an accident — the systems around artists benefit from artists not thinking this way.
The calculator is intentionally simple. It's not trying to produce a number you'd take to an investor. It's trying to produce a shift in perspective: your creative practice has value, and that value can grow, compound, and be owned by you.
If the number feels low, that's information. If it feels high, that's also information. Either way, you're now thinking about your work as something with economic substance — and that's the starting point for everything the A-Corp makes possible.
Try It Yourself
Input your numbers and see what your practice could be worth as an A-Corp.