How many times revenue is a business worth? It depends. Many factors influence the answer to that question, including industry, current market trends, and the economic climate.
A number of valuation methods are used to determine a company’s value; but specifically answering the question How many times revenue is a business worth, is a function of the Multiple of Earnings method (sometimes called the Times-Revenue method or Multiples of Revenue method).
The Multiple of Earnings method determines a business’s current value based on its future profitability. That future profitability is calculated by assigning a multiplier to the business’s current revenue. The applicable multiplier varies widely depending on factors we mentioned earlier, including the specific industry, current market trends, and the economic climate.
The published Business Reference Guide contains a long list of metrics that, according to experts around the country, businesses should or do sell for. At Viking Mergers & Acquisitions, we source industry standards from this guide.
It is also important to note that to accurately determine a business’s worth, it is critical that multiple methods are utilized; not just one single formula. With that in mind, our analysts take a weighted average of multiple methods and other pertinent value influences.
If you’d like more industry-specific information, be sure to visit our page of business valuation methods and selling tips by industry. Remember, regardless of the industry, no business valuation formula is perfect, including the Multiple of Earnings or Times Revenue method. Always choose a valuation that uses more than one method to determine the most accurate price for your business.
Better yet, reach out to us. Request a custom valuation of your business for the most accurate picture of what your business would likely sell for, and how long it might take to complete the transaction.
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