The enterprise value (ev) based on the revenue is substantially lower than the ev based on the ebitda multiple.

How to value a business based on revenue. Business valuation is the process of determining the economic value of a business or company. A business valuation provides an owner with numerous facts and figures regarding the actual value of the company in terms of market competition, asset values, and income values. The result is the value of your business.

The “comps” valuation method provides an observable value for the business, based on what other comparable companies are currently worth. However, determining a business’s market value goes beyond revenue. Comps are the most widely used approach, as they are easy to calculate and always current.

This is the industry average you’re going to use. The earnings multiplier method is based on the idea that a business’s value lies in its ability to produce wealth in the future. The book value method, though simple, may not paint the entire picture of your business’ worth.

To value a company based on profit, first, you gather the profit multiple of similar public companies. Third, multiply that average profit multiple by the profit of the company you’re valuing. However, there can be some problems with this approach.

It looks at all of the assets put into a business to come up with an overall value. Say you want to do a discounted cash flow analysis of a business you’re considering buying. 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. The industry profit multiplier is 1.99, so the approximate value is $40,000 (x) 1.99 = $79,600. Finding the valuation of a business can involve a number of factors, including: