Revenue Multiples

Definition

A valuation method that multiplies annual revenue by an industry-standard multiple (e.g., 5x revenue) to estimate company value. It's less scientific than it sounds, mostly vibes-based.

Example Usage

SaaS companies typically trade at 5-10x ARR, so our $5 million revenue justifies a $25-50 million valuation.

Origin

Financial valuation methodology

Fun Fact

Revenue multiples skyrocketed during 2020-2021 as valuations became increasingly untethered from reality

Source: Financial valuation terminology

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