What multiple of revenue is a company worth?

Multiple of revenue is equal to the selling price of a company divided by 12 months’ revenue of the company. The appropriate revenue multiple to apply to a subject company is obtained from comparable public companies or precedent transaction multiples.

What are the multiples for selling a business?

Charts of Earnings Multiples for Business Valuation SDE multiples usually range from 1.0x to 4.0x. The range of EBITDA multiples (for EBITDA between $1,000,000 and $10,000,000) is 3.3x to 8x, with the averages ranging from 4.5x to 6.5x.

What does revenue multiple mean?

A revenue multiple measures the value of the equity or a business relative to the revenues that it generates. As with other multiples, other things remaining equal, firms that trade at low multiples of revenues are viewed as cheap relative to firms that trade at high multiples of revenues.

What are different valuation methods of a company?

When valuing a company as a going concern, there are three main valuation methods used by industry practitioners: (1) DCF analysis, (2) comparable company analysis, and (3) precedent transactions. These are the most common methods of valuation used in investment banking.

How do you evaluate the valuation of a company?

Determining Your Business’s Market Value

1. Tally the value of assets. Add up the value of everything the business owns, including all equipment and inventory.
2. Base it on revenue. How much does the business generate in annual sales?
3. Use earnings multiples.
4. Do a discounted cash-flow analysis.
5. Go beyond financial formulas.

What is a company valuation based on?

A business valuation might include an analysis of the company’s management, its capital structure, its future earnings prospects or the market value of its assets. The Internal Revenue Service (IRS) requires that a business is valued based on its fair market value.

How do you find the value of multiples?

The following formulas were used to compute the valuation multiples:

1. EV/Revenue = Enterprise Value ÷ LTM Revenue.
2. EV/EBIT = Enterprise Value ÷ LTM EBIT.
3. EV/EBITDA = Enterprise Value ÷ LTM EBITDA.
4. P/E Ratio = Equity Value ÷ Net Income.
5. PEG Ratio = P/E Ratio ÷ Expected EPS Growth Rate.

What is the average multiplier for business valuation?

The average multiplier for all businesses with a value below one million dollars is between 2.3 and 2.7 depending on the database source. This multiplier is applied or multiplied against what is known as Owner’s Discretionary Earnings.

What is revenue valuation?

The times-revenue method is a valuation method used to determine the maximum value of a company. The times-revenue method uses a multiple of current revenues to determine the “ceiling” (or maximum value) for a particular business. However, in some industries, the multiple might be less than one.

How much should a company be worth based on revenue?

Typically, valuing of business is determined by one-times sales, within a given range, and two times the sales revenue. What this means is that the valuing of the company can be between $1 million and $2 million, which depends on the selected multiple.

Why is multiple revenues a good valuation method for investors?

The multiple revenues is a good valuation method for investors. It uses accounting information that is less susceptible to accounting tricks. Being free of accounting trick makes the multiple revenues effective in comparing the value of a company to another company.

What are revenue multiples and why are they important?

Today, revenue multiples have become an important way of measuring the value of a company. Multiple revenues measure the equity of a company. The revenue multiples have become more popular that earnings and book value. In the past investor used the earning and book value to estimate the value of a company.

How do you value a company based on revenue?

Keep in mind most companies have a mix of different types of revenue (one time, recurring, high margin software, low margin services) and a blended revenue multiple is required to value a company (i.e. 50\% transactional, 50\% recurring revenue blends to 3x “fair” multiple)

What multiples do we provide for enterprise value multiples?

We provide enterprise value multiples based on trailing Revenue, EBITDA, EBIT, Total Assets, and Tangible Assets data, as reported. Our valuation multiples are categorised by sector and standard industry classification (“SIC”) codes.