Business Exit Value Calculator

Two multiples go in and one number comes out, but the number is an average of two answers rather than a single valuation. On the defaults, 500,000 of revenue at 1.0 gives 500,000, and 100,000 of profit at 3.0 gives 300,000. The average of those is 400,000, and a growth factor of 1.0 leaves it there. The business is running a 20% margin.

The blend collapses to a single revenue multiple

Which is worth knowing, because comparable sales are quoted as one. The effective multiple is the revenue multiple plus the profit multiple times the margin, all halved: on these figures (1.0 + 3.0 × 0.20) ÷ 2 = 0.8, and 500,000 × 0.8 is the 400,000 the tool returns. The two halves do not contribute equally either. The revenue side puts in 250,000 of the total and the profit side 150,000, a 62.5 to 37.5 split, because the average weights the two valuations equally rather than the two methods.

Which side wins is decided by margin

The profit valuation overtakes the revenue valuation exactly when the margin exceeds the revenue multiple divided by the profit multiple, which on 1.0 and 3.0 is 33.33%. At the default 20% margin the revenue side is the bigger of the two; the same business at a 40% margin would flip the order without either multiple changing.

Averaging two multiples is a heuristic, not a method

Revenue and profit are not independent quantities, since profit is what survives of revenue, so applying a multiple to each and averaging prices the same trading twice from two angles. Transactions settle on one basis: profit where there is profit to capitalise, revenue where there is not yet. What the blend gives is a range with a midpoint, and the two component figures in the result panel are more informative than the headline. For an earnings and balance-sheet view of the same question, the business valuation calculator pairs an earnings multiple with net asset value instead.

Why a multiple exists at all

IAS 38 does not recognise internally generated brands, mastheads, publishing titles or customer lists as intangible assets, and internally generated goodwill is excluded as well on the grounds that it is not an identifiable resource. The things a buyer is paying for are precisely the things a seller's accounts are forbidden to carry. IFRS 3 shows where they surface: on acquisition, the gap between what was paid and the identifiable net assets acquired is recognised by the buyer as goodwill. A multiple is the market pricing what the accounts cannot.

The growth factor is a manual override

It multiplies the finished blend and nothing derives it. At 1.2 the 400,000 becomes 480,000, at 0.8 it becomes 320,000, and it moves the answer by exactly the percentage entered. It is a slot for a judgement about sector conditions rather than a modelled input, which is worth remembering when the output is compared against anything.

What sits outside

Debt, since revenue and profit multiples price the business rather than the owner's proceeds, and net debt is settled out of the price at completion. Working capital adjustments agreed at the same point. Earn-outs and deferred consideration, which change what the headline price is actually worth. Customer concentration, owner dependency and the split between contracted and discretionary revenue, all of which buyers price and none of which appear here. And transaction costs and tax.