Have you tried to work out your stock options, only to be left completely befuddled? Yes, there are multiple factors that play into it. But it doesn’t need to be a complete guessing game.
The team at Onfolk has created a stock option calculator startup tool for you. This resource will help you work out your stock options value quickly and easily.
Working Out Your Startup Stock Options Value
For now, to help you further understand how it works, here’s our guide to working out the value of your startup stock options.
Step 1: Get your numbers together
You’ll want to gather the following numbers:
- Your number of options per grant, along with the stake price, which may be equal to the fair market value.
- The total sum of the company’s diluted shares over all classes. If this is unavailable, approximate it by dividing the company’s most recent valuation by the price per share in the latest round.
Step 2: Workout your potential gains
Decide on a number for the company’s valuation at a particular point in the future. Here’s where people tend to focus on the exit valuation, as often, that’s the very first time you can sell shares and turn all your hard work into actual money.
However, you can also estimate your startup options value as they stand right now. Here’s how to do it:
Let’s say you have 1,000 options with 100 million outstanding shares. In that case, that means a .001% ownership stake. Multiply this stake by the company’s £1 billion valuation, and that will give you the value of your options, i.e. £10,000 minus the exercise costs (taxes and strike price).
You’ll also need to factor in the company’s projected exit value, which we’ll use in the following table.
Step 3: Work out your potential gains after taxes
To find your potential net gains, subtract your costs from the resulting gain in the stock value. These costs are broken down into two parts: the cost to purchase your options and taxes.
We’ll begin with the cost to purchase your options. Your number of options and the strike price determine this cost. Let’s say you’ve worked out your future gains to be £30,000, but that you’d also be paying £5,000 to buy shares. Your projected gains in this example would be £25,000. You’d also be required to pay taxes.
We could play around with scenarios all day long, but without knowing your specific numbers, it wouldn’t necessarily help you. That’s why we recommend using our startup stock options calculator.
So What’s the Value of Your Startup Stock Options?
The higher the exit value, the more valuable your options will be. You can attempt to predict the company’s exit value, but until the exit has occurred, you can’t be 100% sure.
You should also bear in mind that other factors have a say. Liquidity and timing, for example, are influential. A fledgling startup may see the valuation greatly increase over time. This, however, may take a few years to come to fruition, and there could be a few hurdles along the way.
Another aspect of timing are vesting schedules. Someone who has fully vested options will likely value them differently than someone new to the company with a four-year vesting schedule with a one-year cliff.
An Easier Option: Onfolk’s Stock Option Calculator Startup Tool
At Onfolk, we’re known as a go-to all-in-one platform that helps companies automate HR and payroll tasks. Customers love our features, such as self-serve onboarding and our one-minute payroll run. However, we also love creating free resources to help businesses seeking additional support.
Among those resources is our startup stock options calculator that we created to do much of the heavy lifting for you.
We developed this tool with a user-friendly interface and without requiring you to have any financial expertise in order to use it. You can download our startup options calculator here and get started right away.
Have you tried to work out your stock options, only to be left completely befuddled? Yes, there are multiple factors that play into it. But it doesn’t need to be a complete guessing game.
The team at Onfolk has created a stock option calculator startup tool for you. This resource will help you work out your stock options value quickly and easily.
Working Out Your Startup Stock Options Value
For now, to help you further understand how it works, here’s our guide to working out the value of your startup stock options.
Step 1: Get your numbers together
You’ll want to gather the following numbers:
- Your number of options per grant, along with the stake price, which may be equal to the fair market value.
- The total sum of the company’s diluted shares over all classes. If this is unavailable, approximate it by dividing the company’s most recent valuation by the price per share in the latest round.
Step 2: Workout your potential gains
Decide on a number for the company’s valuation at a particular point in the future. Here’s where people tend to focus on the exit valuation, as often, that’s the very first time you can sell shares and turn all your hard work into actual money.
However, you can also estimate your startup options value as they stand right now. Here’s how to do it:
Let’s say you have 1,000 options with 100 million outstanding shares. In that case, that means a .001% ownership stake. Multiply this stake by the company’s £1 billion valuation, and that will give you the value of your options, i.e. £10,000 minus the exercise costs (taxes and strike price).
You’ll also need to factor in the company’s projected exit value, which we’ll use in the following table.
Step 3: Work out your potential gains after taxes
To find your potential net gains, subtract your costs from the resulting gain in the stock value. These costs are broken down into two parts: the cost to purchase your options and taxes.
We’ll begin with the cost to purchase your options. Your number of options and the strike price determine this cost. Let’s say you’ve worked out your future gains to be £30,000, but that you’d also be paying £5,000 to buy shares. Your projected gains in this example would be £25,000. You’d also be required to pay taxes.
We could play around with scenarios all day long, but without knowing your specific numbers, it wouldn’t necessarily help you. That’s why we recommend using our startup stock options calculator.
So What’s the Value of Your Startup Stock Options?
The higher the exit value, the more valuable your options will be. You can attempt to predict the company’s exit value, but until the exit has occurred, you can’t be 100% sure.
You should also bear in mind that other factors have a say. Liquidity and timing, for example, are influential. A fledgling startup may see the valuation greatly increase over time. This, however, may take a few years to come to fruition, and there could be a few hurdles along the way.
Another aspect of timing are vesting schedules. Someone who has fully vested options will likely value them differently than someone new to the company with a four-year vesting schedule with a one-year cliff.
An Easier Option: Onfolk’s Stock Option Calculator Startup Tool
At Onfolk, we’re known as a go-to all-in-one platform that helps companies automate HR and payroll tasks. Customers love our features, such as self-serve onboarding and our one-minute payroll run. However, we also love creating free resources to help businesses seeking additional support.
Among those resources is our startup stock options calculator that we created to do much of the heavy lifting for you.
We developed this tool with a user-friendly interface and without requiring you to have any financial expertise in order to use it. You can download our startup options calculator here and get started right away.
