Build and review a distribution waterfall

Translate the governing agreement

Start with the actual distribution sequence. Identify whose capital is returned, the preferred-return basis, whether it accrues or compounds, any catch-up, and each split or hurdle. Enter the structure that has been agreed, not a target result from a sample.

Check timing and assumptions

A cash-flow model depends on when contributions and distributions occur. A stated preferred return is not a promise that enough cash will exist to pay it. Review how refinance proceeds, operating cash, and sale proceeds are treated, and whether clawbacks or tax distributions matter.

Reconcile the output

Compare the narrative, calculated tiers, fee treatment, and operating or partnership agreement. Use scenarios to see the effect of shortfalls and different exit assumptions. The software does not replace legal drafting or an independent model review.

Read the assumptions before reading the result

Collect the distribution order from the governing agreement: return of capital, preferred return if any, catch-up if any, and each subsequent split or hurdle. Confirm what balance the preferred return uses, how time is measured, whether unpaid amounts accumulate, and whether compounding applies. A displayed percentage alone does not capture these terms.

Use the calculator to explore the entered assumptions, then compare the narrative and results with the source agreement. Test a low-return case, a middle case, and a higher-return case. The tool is a model of its supported mechanics, not a substitute for the legal distribution provisions. Do not confirm suggested starting values until you have verified them.