Valuation
Business Valuation & Multiples
A multiple is a shorthand for assumptions about earnings quality, growth, risk, capital needs and transferability, not a substitute for understanding them.
Buyer lens
Normalize the denominator and stress the risk before arguing about the multiple.
Seller lens
Build evidence for the value drivers that can justify stronger buyer confidence rather than anchoring on an industry headline multiple.
Why it matters
- Two companies in the same industry can deserve materially different economics.
- A lower multiple on overstated earnings can be more expensive than a higher multiple on durable earnings.
- Working capital, CapEx and transaction structure affect effective value even when the headline price does not change.
Evidence to reconcile
- Normalized earnings
- Growth and retention
- Customer/owner concentration
- CapEx and working capital
- Comparable context