#3 – What Multiple should I use for a Business Valuation?

The most common question I get asked as a business valuer and a valuation software CEO is “What multiple should I use to value the business?”

In this episode we pull back the curtain and discuss where multiples come from and why the context matters. Different multiples have different purposes. Multiples used in a capitalised earnings method are fundamentally different from multiples derived in a comparable transaction method. In this episode we go through the differences in detail so you can understand when and how to use certain multiples when valuing a business.  The detail matters and that’s what we cover.

We cover deriving multiples from the weighted average cost of capital using the capital asset pricing model and the Gordon growth model. We also explain how to properly implement market multiples such as MVIC/Revenue and MVIC/EBITDA by carefully understanding the numerator and the denominator so you are making proper comparisons.

The business valuation podcast by business valuers for business valuers and other like-minded professionals. Let’s build a community of enthusiastic and kind business valuation practitioners to share best-practice valuation methodologies, strategies, data sources and tools. Hosted by Trevor Monaghan, a forensic accountant and business valuation specialist. Don’t be shy, subscribe and join the business valuation community as we pull back the curtain and discuss what best-practice looks like.