How this number is made
A multiple is a price someone might pay per dollar of a metric. The metric has to be the same one the comparable sales used. Four times EBITDA is not four times revenue. This page multiplies. It does not choose the multiple.
- Name the metric before you trust the price. Write it down next to the result.
- The multiple comes from sales of similar businesses, not from a round number.
Formula
Value = metric × multiple.
Worked example
With the figures already in the form, value at that multiple is $1,600,000.
Questions
Which multiple is right?
The one paid for businesses like yours, of your size, recently. A public-company multiple is usually the wrong neighborhood for a small private firm.
Does this include debt?
If the multiple is on equity value, debt is already out. If it is on enterprise value, debt still has to be subtracted to get to cash for the owner. Know which one you typed.