New York SBDC Research Network

One of the most common methods of business valuation is using valuation multiples. What are Valuation Multiples A factor wherein a value or price serves as the numerator and financial, operating or physical data of the company being valued serve as the denominator. What is Valuation using Multiples Valuation using multiples or relative valuation is a method of estimating the value of an asset by comparing it to the values assessed by the market for similar or comparable assets. The process consists of: identifying comparable assets (the peer group) and obtaining market values for these assets. converting these market values into standardized values relative to a key statistic, since the absolute prices cannot be compared. This process of standardizing creates valuation multiples. applying the valuation multiple to the key statistic of the asset being valued, controlling for any differences between asset and the peer group that might affect the multiple. Valuation u...

Whether selling or purchasing a small business, determining the value of the business is essential. There are multiple different methods for valuing a business.  Below is a description of some of the most common methods of valuing/pricing a business. Descriptions have been provided by American Business Masters & Investments, Inc. (1) Rules Of Thumb Rules Of Thumb (ROT) can be useful tools for appraising small and medium size businesses. But, there is no one, universally acceptable, “Rules Of Thumb” method. All of them are only rough descriptions of reality. They are all gross simplifications, and can be as inappropriate as they are appropriate. Some are based primarily on “comps” (comparables with the sale of similar types of businesses), some are based on standard accounting approaches, some are based on the experience of the compiler/publisher of the ROT, and can be in conflict with ROT’s available, on the same business, from a different compiler/publisher. So, Ru...

The September 18, 2013 webinar Business Valuation: Definitions, Multiples, and Resources by Alexis Mokler of the NYS Small Business Development Center is now available on YouTube. Click on video or use this link . (23:29)