Understanding your valuation results
These two figures represent independent estimates from two different metrics; a real-world valuation typically triangulates between multiple methods rather than relying on one number.
| Metric | What it tells you |
|---|---|
| EBITDA-based valuation | An estimate of business value based on a multiple of operating earnings — generally the preferred approach for established, profitable businesses. |
| Revenue-based valuation | An estimate of business value based on a multiple of top-line revenue — often used for early-stage or high-growth businesses without stable profitability. |
| EBITDA margin | EBITDA as a percentage of revenue, indicating how much of each revenue dollar converts to operating earnings. |
- This calculator provides an educational, order-of-magnitude estimate only. Actual business valuations for a sale, financing, or legal purpose typically require a professional valuation that also considers growth prospects, customer concentration, industry conditions, and deal structure.
- Multiples entered here are user-supplied assumptions, not derived automatically — sourcing a realistic multiple for a specific industry and business size is a critical and separate research step.
What is a market-multiple business valuation?
A market-multiple valuation estimates a business's value by applying a multiple — derived from comparable business sales, public company trading multiples, or industry conventions — to a financial metric such as annual revenue or EBITDA (earnings before interest, taxes, depreciation, and amortization). It is one of several standard approaches to business valuation, alongside discounted cash flow and asset-based methods.
EBITDA multiples are the more commonly used approach for established, profitable businesses because EBITDA approximates operating cash flow before financing and accounting decisions, making it easier to compare businesses with different capital structures. Revenue multiples are more often used for early-stage or high-growth businesses that may not yet be profitable, where revenue is the more stable and available figure.
Multiples vary substantially by industry, business size, growth rate, and market conditions — there is no single correct multiple. NYU Stern finance professor Aswath Damodaran's widely cited valuation-multiple datasets illustrate how much multiples vary across industries and over time, which is why this calculator treats the multiple as a user-supplied input rather than a fixed assumption.
How to use this business valuation calculator
- Enter annual revenue for the business being valued.
- Enter annual EBITDA (earnings before interest, taxes, depreciation, and amortization) for the same period.
- Enter a revenue multiple appropriate to the industry and business (research comparable transactions or ask an advisor for a realistic range).
- Enter an EBITDA multiple appropriate to the industry and business.
- Read the resulting revenue-based valuation, EBITDA-based valuation, and EBITDA margin. Compare the two valuation figures as a range rather than relying on either alone.
The formula behind multiple-based valuation
EBITDA-based valuation multiplies annual EBITDA by the EBITDA multiple. For example, with $200,000 in annual EBITDA and a multiple of 5×, EBITDA-based valuation is $200,000 × 5 = $1,000,000.
Revenue-based valuation multiplies annual revenue by the revenue multiple. With $1,000,000 in annual revenue and a multiple of 1.5×, revenue-based valuation is $1,000,000 × 1.5 = $1,500,000. EBITDA margin (EBITDA ÷ revenue) is also reported, since it indicates how efficiently revenue converts to earnings and is often a factor in what multiple a buyer would apply.
Common mistakes
- Applying a generic or outdated multiple instead of researching current comparable transactions for the specific industry and business size.
- Treating revenue-based and EBITDA-based valuations as if they should match — they are independent estimates from different metrics and can reasonably differ.
- Using EBITDA as reported without adjusting for one-time or non-recurring items (a step known as normalizing EBITDA), which can distort the multiple applied.
- Relying solely on a multiples-based estimate for a major transaction without a professional valuation, which typically also weighs discounted cash flow analysis and deal-specific factors.
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How do you value a small business using multiples?
A common approach multiplies a financial metric — typically annual revenue or EBITDA — by a multiple derived from comparable business sales or industry convention. EBITDA multiples are generally preferred for established, profitable businesses, while revenue multiples are more common for early-stage or high-growth businesses.
What is a typical EBITDA multiple for a small business?
EBITDA multiples vary substantially by industry, business size, growth rate, and market conditions, so there is no single typical figure. Valuation professionals such as NYU Stern's Aswath Damodaran publish industry-level multiple data that illustrates this range; researching current comparable transactions in the specific industry is necessary for a realistic estimate.
Why do revenue-based and EBITDA-based valuations give different numbers?
Revenue and EBITDA are different financial metrics with different typical multiples, so the two valuation approaches are independent estimates rather than two paths to the same number. A meaningful gap between them can also reflect the business's profitability — a business with a lower EBITDA margin will often show more divergence between the two figures.
Is this calculator a substitute for a professional business valuation?
No. This calculator provides an educational, order-of-magnitude estimate using user-supplied multiples. A formal valuation for a sale, financing, litigation, or tax purpose typically requires a qualified valuation professional who considers additional factors such as discounted cash flow, customer concentration, and deal structure.
Kaynaklar
- Damodaran A. Valuation multiples by industry sector. New York University Stern School of Business. pages.stern.nyu.edu/~adamodar.
- Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. 13th ed. McGraw-Hill Education, 2020.
- U.S. Small Business Administration. Buy an existing business or franchise — valuation guidance. sba.gov.