I thought my company’s valuation would be 5 years of my average revenue. But I heard it’s actually 2 years. What’s the right way to know this?
Nobody really cares what your revenue is. They care what your profits are.
A reasonable estimate is 3x owner benefit if it’s small.
If you have meaningful assets it would increase the multiple.
Try a business valuation calculator, they do pretty well. And also try to estimate it with multipliers of ebitda for example. Try multiple ways to come to a suitable average
There’s no one-size-fits-all answer for this. It heavily depends on your industry, EBITDA, profit margins, etc. Team size, assets, so on and so on.
Your best bet is to start researching how companies are evaluated on YouTube, then check out a few calculators you can find in Google. It’s also a good idea to Google search big companies in your industry that were recently acquired and work your way backwards from there.
2-3 years of true profit for small businesses. No one would pay 5 years of revenue, that’s far too high.
Profit not revenue. The grey area is mainly goodwill and assets.
On top of what others said just I’ll emphasize
Depends on risk, maturity of business and growth potential. Most small businesses have a range of 1.2 to 3.
You may also find that you’re industry has a range and what it’s based on such as total sales, revenue, customer list ect
5x+ on revenue is typically what you see for growth startups, with high margins. A heuristic indicator would be in VCs invested in it, for everything else 3-5x on profit is what I encountered most.
Revenue is vanity, profit is sanity
I’ll pay you three times net profit