First, estimate its future cash flow.

How to value a business based on revenue. For instance, if the figure for your business industry is two, you multiply the business profit by two. This is a 0.5x sales multiple. A startup growing at 40% per year may receive a multiple of 6 to 10 whereas a company with 10% growth may only receive a multiple of 1 or 2.

For example, if your company’s adjusted net profit is $100,000 per year, and you use a multiple like 4, then the value of the business will be. In this guide, you will. This is the industry average you’re going to use.

To figure out this value, take the cash flow of the final year. Third, multiply that average profit multiple by the profit of the company you’re valuing. In profit multiplier, the value of the business is calculated by multiplying its profit.

To calculate valuation using this method, you take the revenue of your startup and multiply it by a multiple. Understand that revenue isn’t always profit: The two numbers give you an approximate range of potential values for your business.

Your industry multiple is an average of what businesses typically sell for in your industry so, if your multiple is two, companies usually sell for. The result is the value of your business. The book value method, though simple, may not paint the entire picture of your business’ worth.

It looks at all of the assets put into a business to come up with an overall value. The three steps to determine the value of a business are: The earnings or income of a business are used to value a business in this method.