1. What Is Small Business Valuation?

Small business valuation is the process of determining the economic value of a business using revenue multiples. This method provides a quick estimate based on industry standards and annual revenue performance.

2. How Does The Calculator Work?

The calculator uses the revenue multiple formula:

Where:

• \( Revenue \) — Annual business revenue in currency
• \( Multiple \) — Industry-specific multiplier (typically 0.5-2)

Explanation: The revenue multiple method multiplies annual revenue by an industry-specific factor to estimate business value. Different industries have different typical multiples based on profitability and growth potential.

3. Importance Of Business Valuation

Details: Accurate business valuation is crucial for selling a business, seeking investment, obtaining financing, estate planning, and strategic decision-making. It provides an objective basis for business transactions.

4. Using The Calculator

Tips: Enter annual revenue in your local currency and select an appropriate industry multiple. Research industry standards for accurate multiples. All values must be valid (revenue > 0, multiple between 0.5-2).

5. Frequently Asked Questions (FAQ)

Q1: What factors affect the revenue multiple?
A: Industry type, profit margins, growth rate, market conditions, customer concentration, and competitive landscape all influence the appropriate multiple.

Q2: Is revenue multiple the only valuation method?
A: No, other methods include earnings multiples (EBITDA), discounted cash flow, asset-based valuation, and comparable company analysis.

Q3: What are typical multiples for different industries?
A: Service businesses: 0.5-1.5x, tech companies: 1-3x, retail: 0.5-1x, manufacturing: 1-2x. Research your specific industry for precise multiples.

Q4: When is revenue multiple method most appropriate?
A: Best for early-stage companies, businesses with consistent revenue patterns, and industries where revenue strongly correlates with value.

Q5: Should I get a professional valuation?
A: For major transactions (sale, merger, significant financing), professional valuation is recommended for accuracy and legal compliance.