Valuation

In one sentenceWhat a business is worth, usually estimated from its profits, revenue, growth and risk.

What it means

Small and mid-size businesses are often valued as a multiple of EBITDA or seller's discretionary earnings; fast-growing software companies are often valued on a multiple of recurring revenue (ARR). Recurring revenue, growth, low owner dependence and clean books all raise value.

How to use it

• Build value on purpose: document processes (SOPs), reduce dependence on yourself, grow recurring revenue.
• Get a professional valuation before any sale or investment talk.

Related terms

Valuation Multiple EBITDA MRR / ARR SOP