Valuation multiples for private companies vary by industry, size, growth prospects, and other factors. Here’s a look at the typical business valuation multiples for private companies in the 10 biggest industries in the United States, along with the major factors impacting their valuation:
Check out general business valuation model frameworks.
Keep in mind these are just rules of thumb and you should consult a certified valuation expert for more comprehensive analysis. Nearly all of the financial model templates I build will have an input for either 12-month trailing EBITDA or Revenue multiple as the basis for exit value. For real estate, I usually use an exit cap rate.
1. Technology (Software and Services)
Valuation Multiples: 3x-10x EBITDA, 2x-5x Revenue
Major Factors:
- Growth rate
- Recurring revenue
- Intellectual property
- Customer base and retention
- Market position
2. Healthcare (Pharmaceuticals, Biotechnology, and Life Sciences)
Valuation Multiples: 5x-15x EBITDA, 3x-6x Revenue
Major Factors:
- Regulatory approvals
- Product pipeline
- Market demand
- Research and development capabilities
- Profit margins
Valuation Multiples: 5x-10x EBITDA, 1.5x-3x Revenue
Major Factors:
- Interest rate environment
- Regulatory environment
- Asset quality
- Diversification of services
- Customer relationships
4. Consumer Goods (including Food & Beverages)
Valuation Multiples: 6x-12x EBITDA, 1x-3x Revenue
Major Factors:
- Brand strength
- Distribution channels
- Product innovation
- Market trends
- Cost of goods sold
5. Retail
Valuation Multiples: 5x-8x EBITDA, 0.5x-1.5x Revenue
Major Factors:
- Foot traffic
- E-commerce presence
- Inventory management
- Seasonal fluctuations
- Consumer confidence
6. Real Estate
Valuation Multiples: 10x-20x EBITDA, 4x-10x Revenue
Major Factors:
- Location
- Property type
- Rental income
- Occupancy rates
- Market conditions
7. Energy (Oil & Gas, Renewable Energy - wind farm, biogas)
Valuation Multiples: 4x-8x EBITDA, 1x-3x Revenue
Major Factors:
- Commodity prices
- Regulatory environment
- Production capacity
- Technological advancements
- Environmental impact
8. Industrials (Manufacturing, Construction)
Valuation Multiples: 5x-10x EBITDA, 1x-2x Revenue
Major Factors:
- Production efficiency
- Supply chain stability
- Market demand
- Technological innovation
- Labor costs
9. Telecommunications
Valuation Multiples: 6x-12x EBITDA, 2x-4x Revenue
Major Factors:
- Network infrastructure
- Subscriber base
- Technological upgrades
- Regulatory environment
- Competitive landscape
10. Media and Entertainment
Valuation Multiples: 5x-10x EBITDA, 2x-4x Revenue
Major Factors:
- Content library
- Audience size and engagement
- Distribution channels
- Advertising revenue
- Technological adoption
Major Factors Impacting Valuation Across Industries
- Growth Potential: High-growth companies often command higher multiples.
- Profitability: Consistent profitability can enhance valuations.
- Market Position: Leading market positions can result in premium valuations.
- Revenue Quality: Recurring and diversified revenue streams are highly valued.
- Management Team: Experienced and capable management can drive higher valuations.
- Economic Environment: Macro-economic factors such as interest rates, inflation, and overall economic health impact valuations.
These multiples and factors provide a general overview and can vary significantly based on specific circumstances and market conditions.
Article found in Valuation.
