Methodology
Four methodologies. One defensible number.
Every valuation method a qualified valuer would use, applied with the same academic framework and published industry data. No proprietary black boxes. Every assumption shown, sourced, and stress-testable.
Why four, not one
No single method produces a defensible valuation
A revenue multiple tells you what the market pays for turnover. An EBITDA multiple tells you what it pays for cash generation. An asset-based number gives you a floor. A DCF builds the value from forward expectations. Each answers a different question – and the confident-sounding number from any one method, on its own, is fragile.
A defensible valuation uses all four, weighted for the business profile, blended into a range. That’s the only way to produce a number that holds up when a buyer’s analyst, an investor’s associate, or a court-appointed valuer runs their own numbers against yours.
Revenue multiple
The simplest and fastest method, useful for triangulation and for early-stage businesses where profit is reinvested.
What it measures
What the market is currently paying per dollar of annual turnover in your industry. Calibrated from actual transactions and public company trading multiples.
How we calculate it
- Start from the industry median revenue multiple, taken from the most recent Damodaran NYU Stern quarterly dataset for your industry classification.
- Adjust for business size: smaller businesses typically trade at a discount. Standard size bands: <$1M, $1M–$5M, $5M–$25M, $25M+.
- Adjust for revenue quality: recurring revenue earns a premium, transactional revenue trades at the median, one-off project revenue at a discount.
- Adjust for growth rate: faster growth than industry median earns a premium, slower growth takes a discount.
- Apply the adjusted multiple to your trailing twelve months revenue.
When it matters most
High-growth businesses where current profit understates future value. SaaS and subscription businesses. Pre-profitability companies with clear unit economics.
Known limitations
Ignores margin quality entirely. A business with 80% gross margin is treated the same as one with 20% gross margin at the same revenue. Always triangulated against EBITDA multiple to catch margin-quality differences.
EBITDA multiple
The buyer’s default method. What most private-company transactions actually close at.
What it measures
What the market pays per dollar of normalised operating cash generation. This is what the buyer actually cares about: what the business will throw off in cash after they own it.
Normalising EBITDA
Reported EBITDA rarely equals cash-generating capacity. Typical normalising adjustments:
- Owner compensation above or below market. If the founder takes a below-market salary, add back the difference. If they take an above-market salary, deduct it.
- One-off items. Legal fees from a one-time dispute. Restructuring costs. Any non-recurring expense.
- Related-party transactions. Above-market rent to a family-owned property. Below-market services from a sister company.
- Non-operating income. Interest income, FX gains, gains on asset disposal.
How we apply the multiple
- Start from the industry median EBITDA multiple from Damodaran quarterly data.
- Size adjustment: same bands as revenue multiple, typically larger discount for small size because EBITDA-multiple transactions concentrate at the mid-market.
- Margin-quality adjustment: businesses with margins at or above industry median earn a premium; below-median margins take a discount.
- Apply adjusted multiple to normalised EBITDA.
When it matters most
Profitable businesses. Mid-market transactions. Any situation where the buyer will finance the acquisition with debt against the acquired cash flows (most private-company deals).
Asset-based
The floor value. Rarely the headline number for a going concern, but it anchors the lower bound of the valuation range.
What it measures
The realisable value of the business’s assets, tangible and intangible, net of all liabilities. Think of it as: “if we sold the parts separately, what would we get?”
Tangible assets
Property, plant, equipment, inventory, cash, receivables. Adjusted for likely realisable value vs book value. Receivables discounted for collection risk. Inventory marked to net realisable value.
Intangible assets
- Brand. Licensed comparable royalty rates, applied to revenue.
- Customer lists & relationships. Multi-period excess earnings method for businesses with identifiable customer contracts.
- Technology & IP. Replacement cost method for internally-developed software and processes.
- Going-concern premium. The value of the assembled business as an operating unit, over and above the sum of its parts. Usually calibrated from the gap between EBITDA and asset values.
When it matters most
Asset-heavy businesses: manufacturing, real estate, specialised equipment. Distressed scenarios where the business isn’t generating cash. Holding companies. Estate valuations where the question is “what are the assets worth?”.
When it matters least
Asset-light services businesses: consulting, software, agencies, professional services. For these, asset-based value is often 10–20% of the blended valuation – useful as a floor, not the headline.
Discounted cash flow (DCF)
The methodology most private-equity investors and corporate finance teams use to validate a final number. Included only in Detailed reports.
What it measures
The sum of all future cash flows the business will generate, discounted back to present value using a risk-appropriate discount rate. Builds the valuation from the forward operating plan rather than from market multiples.
The 5-year explicit projection
For each of the next 5 years, we project:
- Revenue growth. Starting from your own view, sanity-checked against industry growth rates.
- Gross margin. Trending towards industry median unless you can defend otherwise.
- Operating expenses. Typically growing at 60–75% of revenue growth rate, reflecting fixed-cost dilution as revenue scales.
- Working capital requirements. Based on industry working-capital intensity.
- Capital expenditure. Maintenance capex at industry norms, plus any growth capex needed to support the revenue plan.
The WACC discount rate
Weighted average cost of capital, built bottom-up:
- Risk-free rate. 10-year government bond yield in your home currency.
- Equity risk premium. Damodaran’s implied equity risk premium for your country.
- Industry beta. Unlevered beta from Damodaran NYU Stern sector data, relevered for your capital structure.
- Size premium. Small-company size premium from published studies (Duff & Phelps / Kroll). Typically 1.5–3% for sub-$25M businesses.
- Specific-company premium. 0–3% for identified business-specific risks (concentration, key-person dependence, etc.).
- Cost of debt. Risk-free plus industry-appropriate credit spread, after tax.
Terminal value
Gordon Growth Model: terminal value = final-year free cash flow × (1 + g) / (WACC − g), where g is the long-run sustainable growth rate. Capped at the projected long-term GDP growth rate for your economy (typically 2–3%).
Sensitivity analysis
The Detailed report includes a sensitivity grid showing how the DCF value changes with different WACC and terminal growth assumptions. This is the single most scrutinised page when a buyer’s analyst reads the report.
Blending the four methods
How we weight the methods for your business
No two businesses get the same weighting. The weighting reflects the business profile: what drives its value, what methodology a buyer would actually apply.
| Business profile | Revenue | EBITDA | Asset | DCF |
|---|---|---|---|---|
| High-growth SaaS / subscription | 30% | 30% | 10% | 30% |
| Mature profitable services | 20% | 45% | 10% | 25% |
| Asset-heavy manufacturing | 15% | 30% | 30% | 25% |
| Pre-profitability / loss-making | 50% | 10% | 10% | 30% |
| Distressed / wind-down | 10% | 20% | 60% | 10% |
| Holding company / investment | 0% | 20% | 70% | 10% |
The report shows your specific weighting with a one-paragraph explanation of why that weighting applies to your business.
Where the numbers come from
Published data, sourced and dated on every page
No proprietary data. No “our AI has determined.” Every industry multiple, benchmark, and rate in your report is traceable to a published, academically-respected source.
Damodaran NYU Stern dataset
Professor Aswath Damodaran publishes quarterly datasets from his position at NYU Stern School of Business. The global reference for industry multiples, betas, costs of capital, and margin benchmarks. Used by corporate finance teams, academics, and professional valuers worldwide. Refreshed every quarter, free to access, methodology fully transparent.
What we use it for: industry revenue multiples, EBITDA multiples, unlevered betas, margin benchmarks, cost of capital components.
IBISWorld industry reports
Industry-level revenue, margin, and growth statistics across 700+ industries in UK, US, Ireland, Canada, Australia, and New Zealand. Used for peer benchmarking and for sanity-checking the Damodaran industry classifications.
What we use it for: industry growth rates, operating margin distributions, working capital intensity, capital expenditure intensity.
National government bond yields
Risk-free rates pulled from the relevant central bank or treasury at the time your report is generated. Used as the starting point for the WACC build-up in the DCF.
What we use it for: risk-free rate component of WACC, by jurisdiction.
Published size premium studies
Size-premium data from the Duff & Phelps Valuation Handbook (now published by Kroll). Standard reference for the size discount applied in private-company valuation.
What we use it for: size premium component of WACC; size adjustment applied to market multiples.
Every table in your report cites which dataset, which classification, and which refresh date. Your accountant can verify every source independently.
Beyond the number
The 8-driver Value Builder Score
The valuation is a snapshot. The 8-driver framework is the diagnostic: where is value being created, where is it being eroded, what’s most worth fixing before you take the business to market.
01 · Financial performance
Margin, growth, and profitability trend vs industry. Buyers pay for stability and trajectory.
02 · Growth potential
Addressable market, pricing power, scalability of the operating model. Drives terminal value in the DCF.
03 · Monopoly control
Differentiation, defensibility, switching costs. Businesses with real moats trade at premium multiples.
04 · Recurring revenue
What percentage of revenue repeats without new sales effort. The single biggest driver of EBITDA-multiple premium in services businesses.
05 · Customer concentration
How much revenue depends on the top 3, 5, 10 customers. High concentration is the number-one reason valuations get discounted in due diligence.
06 · Owner dependence
How much the business depends on the founder personally. Sales, relationships, technical knowledge, decision-making. The thing buyers worry about most.
07 · Team health
Key-person risk beyond the founder. Retention, skill depth, succession readiness. Affects both valuation and deal structure.
08 · Switching costs
How hard it is for customers to move away. Data lock-in, integration depth, process fit. The driver of customer lifetime value in the DCF.
Methodology questions
For accountants and skeptical buyers
Methodology built to survive scrutiny.
Every number sourced. Every assumption shown. Every working checkable by your accountant, your buyer, or your investor.