For additional industry-specific insight and information, visit our page of Selling Tips & Business Valuation Multiples by Industry.
Challenges of the Times Revenue Method
It is important to acknowledge that revenue (even recurring revenue) does not necessarily translate to profit, and likewise, an increase in revenue does not automatically equate to an increase in profit. Thus, the main challenge in using the Times Revenue method is that it is not always a reliable value indicator.
Also, as we mentioned earlier, factors like margins, growth patterns, and recurring revenue are relevant indicators to a business’s value. How many times revenue a business is worth is just one data point to consider.
Regardless of the industry, no business valuation formula is perfect. To accurately determine a business’s worth, it is critical that more than one method be utilized; not just a single formula. With that in mind, at Viking Mergers & Acquisitions, our analysts take a weighted average of multiple methods and other pertinent value influences.
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