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Valuation Formula:
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Revenue-based valuation is a method of determining a company's worth by multiplying its annual revenue by an industry-specific multiple. This approach is commonly used for startups and high-growth companies where earnings may be volatile or negative.
The calculator uses the simple valuation formula:
Where:
Explanation: The multiple varies by industry, company growth rate, profitability, market conditions, and comparable company valuations.
Details: Revenue-based valuation provides a quick estimate of company worth, useful for fundraising, M&A transactions, and establishing baseline valuations for early-stage companies.
Tips: Enter accurate annual revenue figures and an appropriate industry multiple. Multiples typically range from 0.5x to 10x+ depending on the sector and company characteristics.
Q1: What is a typical revenue multiple?
A: Multiples vary widely by industry. SaaS companies often command 5-15x multiples, while traditional retail might be 0.5-1.5x. Always research recent comparable transactions.
Q2: When is revenue valuation most appropriate?
A: Best for high-growth companies, startups, and businesses where revenue is growing rapidly but profitability may not yet be established.
Q3: What are the limitations of revenue-based valuation?
A: Doesn't account for profitability, cash flow, debt levels, or market conditions. Should be used alongside other valuation methods for a complete picture.
Q4: How do I determine the right multiple?
A: Research comparable companies, recent acquisitions in your industry, and consult industry reports or valuation experts.
Q5: Should revenue be trailing or forward?
A: Both approaches are used. Trailing revenue is more conservative, while forward revenue projections may be used for high-growth companies.