Bizminer Business Valuation Multiples Definitions and Limitations
Multiples Definition
Our multiples are derived from the Dealstats database of more than 30,000 historical business sale transactions. Bizminer cleans and filters the database for locations and anomalies, and applies standard outlier protocols and exclusion calculations to the raw data to determine median and quartile values at the NAICS-4-5-6 levels.
The Earning Multiple calculation is:
Sale Price/Discretionary Owner Earnings where: Discretionary Owner Earnings =Operating Profit + Owner’s Compensation + Depreciation/Amortization)
Sale Price is the total consideration paid to the seller and includes any cash, notes, and/or securities that were used as a form of payment plus any interest-bearing liabilities the buyer assumed. The Sale Price includes the non-compete value and the assumption of interest-bearing liabilities and excludes: (1) the real estate value; (2) any earn-outs (because they have not yet been earned and they may not be earned); and (3) the employment/consulting agreement values.
Asset Sale Note: In an Asset Sale, the assumption is that all or substantially all operating assets are transferred in the sale. In an Asset Sale, the Sale Price may or may not include all current assets, non-current assets, and current liabilities (liabilities are typically not transferred in an asset sale).
Selling Price: The selling price is the total consideration paid to the seller and includes any cash, notes, and/or securities that were used as a form of payment plus any interest-bearing liabilities the buyer assumed. The selling price includes the non-compete value and the assumption of interest-bearing liabilities and excludes the real estate value; any earn-outs; and the employment/consulting agreement values. In an Asset Sale, the assumption is that all or substantially all operating assets are transferred in the sale.
Bizminer Valuation Multiples Limitations
You should not use Bizminer Valuation Multiples in place of a valuation. Bizminer does not suggest using Valuation Multiples as the basis of any specific business-related or other financial transaction. You should not attempt to use a Valuation Multiples to secure a business or personal loan. Our data sources may be incomplete or incorrect; nor have we physically researched or inspected many important details necessary to the valuation of a specific enterprise The Valuation Multiples do not consider the market environment details nor the idiosyncrasies of a firm’s performance that can influence the actual value or selling price.
Multiple values are presented at the most detailed available industry level. In some cases, detailed NAICS or sales group transaction records do not include the minimum number of transactions required for our multiples calculations. In those cases, we may display multiples which reflect values of the directly related NAICS parent industry or sales group. Depending on availability, multiples for one approach (sales or earnings) may reflect a more detailed industry tier than the other.
We encourage business buyers, sellers, owners and browsers to enhance their understanding of the value of any enterprise before making decisions or taking action. The Valuation Multiples are modeled informational tools, not guides to action. For that we recommend obtaining an appraisal from a business broker, a valuation from a certified valuation professional, or both.