Valuation Multiple
In one sentenceThe number a buyer multiplies a company's earnings or revenue by to arrive at a price, like "5x EBITDA".
What it means
Multiples vary by industry, size, growth, risk and the market. Higher growth, recurring revenue and lower risk earn higher multiples.
How to use it
- Ask advisors for recent multiples in your industry and size range.
- Always confirm what the multiple applies to: EBITDA, EBITA, revenue or ARR.
FormulaValue ≈ multiple × earnings (or revenue)
Example: 5 × $800,000 EBITDA = $4,000,000
Example: 5 × $800,000 EBITDA = $4,000,000
Related terms
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