Business Valuation Formula
This fundamental business valuation formula provides a quick and effective way to estimate a company's worth by multiplying its chosen earnings metric by an appropriate industry valuation multiple.
Formula
Copy the exact expression or work through it step by step below.
Business Valuation = Earnings x Valuation Multiple Variables
BV
Business Valuation
The business valuation value plugged into the business valuation calculation.
Earn
Earnings
The earnings value plugged into the business valuation calculation.
VM
Valuation Multiple
The valuation multiple value plugged into the business valuation calculation.
Step By Step
- 1
Set the baseline case with the real calculator inputs.
Annual Revenue = $500,000, Revenue Multiple = $1.50, Sde = 150,000, Sde Multiple = 3
- 2
Translate rates, periods, and cash values onto the same footing before combining them.
Keep the business valuation assumptions consistent instead of mixing monthly and annual views.
- 3
Apply the formula and read the first calculator outputs, not just the headline assumption.
The calculator lands with low at 562,500 and mid at 750,000.
- 4
Run one changed scenario so the formula is stress-tested before it is trusted.
The business valuation calculator page is the fastest way to compare that second case.
Worked Example
Business Valuation sample case
Annual Revenue
$500,000
Revenue Multiple
$1.50
Sde
150,000
Sde Multiple
3
Business Valuation = Earnings x Valuation Multiple using annual revenue $500,000, revenue multiple $1.50, sde 150,000, sde multiple 3.
The calculator lands with low at 562,500 and mid at 750,000.
Common Variations
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Sources & References
- SaaS Valuation Multiples in 2024: What to Expect — Blossom Street Ventures
- Understanding Business Valuation Multiples — Forbes Advisor
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