$treet $mart$: How Much Is My Business Worth?

$treet $mart$: How Much Is My Business Worth?

$treet $mart$ (vol. 22)

Finance & Economics Focus

Launching or buying a business is an exciting adventure, but the potential for success lies in understanding essential elements such as valuations and revenue models. Having this knowledge won't just benefit us when selling or leveraging our venture - it's also indicative of our ability to create sturdy income streams. Without comprehending these fundamentals, we may find ourselves ill-prepared and our businesses at risk.

Simply put, every hour invested in our business should be yielding a future ROI. Therefore, it is critical that we strategically think about the revenue streams in our business. And be aware that the revenue model and profit margins in our business will be the guideposts future financiers will use to value our business when seeking funding, exploring a sale, or creating leverage for ourselves.



1: one who specializes in raising and expending public moneys

2: one who deals with finance and investment on a large scale.

Revenue models and their equity multiples are crucial factors in understanding your business's current and future value. However, not all models are created equal; transactional ones generally don't fare as well as those with recurring revenues when it comes to achieving higher equity multiples. From subscription-based models to purchasing in bulk, we can choose which pricing mechanisms. And if we are smart, we can change the way our revenue models work in order to create more intrinsic value in the future.

The 4 Revenue Models

  • Transaction-based revenue: Revenue from sales of goods or services that usually result in one-time customer payments. Think retail shopping, real estate brokerage, and restaurants.
  • Service revenue: Revenues generated by providing service to customers are calculated based on time. For example, the number of hours of consulting services provided. Think Consulting, Marketing Agencies, Retainers, and Traditional Personal Training.
  • Project revenue: Revenues earned through one-time projects with existing or new customers. Think Contracting, graphic design, websites design & development.
  • Recurring revenue: Earnings from ongoing payments for continuing services or after-sale services to customers. The recurring revenue model is the model most commonly used by businesses because it is predictable and it assures the company’s source of revenue is ongoing. Think Software as a service (SaaS), Marketing, Gym memberships, online coaching platforms, email newsletters, trash/waste management.


Experienced entrepreneurs understand that the success of businesses hinges on more than just a great idea and proven leaders - as do investors and financiers.  As a result, revenue multiples by industry have become a popular way to value businesses across various sectors. This is also a great tool to measure up comparable companies.

Revenue multiple = Selling price of company / Annual Revenue


Revenue multiples can give investors and financial analysts a bird's eye view of the profitability potential of businesses, especially those in their early stages. These ratios are built upon gross revenues to create an industry-specific 'factor' that reveals whether any given business stands out from similar public companies. With wider data sets underpinning such metrics, revenue multiples become much more reliable indicators for future success.

Smart Companies Stack Streams

Instead of focusing solely on transactional or project-based revenue, we have an opportunity to make our businesses more valuable in the long run by pursuing multiple revenue models - and if possible a recurring revenue model.  Businesses like roofing, painting, and software development can deliver high-ticket contracts but they would be challenging to convert into recurring revenue.  

The Highest Multiples

Software as a service (SaaS), is far and away the most scalable way to high valuation multiples.  It's unique in its ability to duplicate without the need for more people power.  Therefore it has an infinite scale and lots of recurring subscriptions

Whether you're looking to compare with similar companies or just trying to get started on figuring out how much something is worth, knowing these industry benchmarks may give you some useful insight.

  • 1x – This business is dealing with products that don't promise much margin or growth – a tough road ahead!
  • Less than 3x – Investors interested in a reliable source of income might benefit from putting their money into businesses with an established and consistent cash flow. Many such companies are available, offering investors the chance to profit through consistent revenue streams over time.
  • 3x to 5x – Investors are cautiously optimistic about businesses in this particular sector, viewing them as dependably decent chances for success.
  • More than 10x – This category is the ‘A-list’ as per investors. Businesses displaying a 10x or more valuation have the highest chances of growth, profits, and expansion. Think SaaS

How Does My Business Stack Up?

Here is a comprehensive list of Revenue Multiples by industry from eqvista.com.

Row LabelsAnnual VolatilityEV to Revenue
Accident & Health Insurance44.03%0.98
Agricultural Chemicals62.18%2.88
Air Freight/Delivery Services43.54%2.79
Assisted Living Services53.87%4.41
Auto Manufacturing96.23%12.53
Auto Parts: O.E.M.41.07%1.76
Automotive Aftermarket63.62%1.57
Beverages (Production/Distribution)62.32%7.85
Biotechnology: Biological Products (No Diagnostic Substances)111.05%17.75
Biotechnology: Commercial Physical & Biological Research110.13%10.33
Biotechnology: Electromedical & Electrotherapeutic Apparatus62.78%16.85
Biotechnology: In Vitro & In Vivo Diagnostic Substances110.61%6.68
Biotechnology: Laboratory Analytical Instruments89.65%5.03
Building Materials68.86%2.84
Building operators51.84%6.25
Building Products76.38%2.78
Business Services91.84%14.37
Catalog/Specialty Distribution92.93%2.54
Clothing/Shoe/Accessory Stores74.62%1.35
Coal Mining64.42%1.54
Commercial Banks38.70%3.24
Computer Manufacturing65.60%2.20
Computer peripheral equipment83.97%3.23
Computer Software: Prepackaged Software112.17%17.81
Computer Software: Programming Data Processing0.00%2.68
Construction/Ag Equipment/Trucks41.67%19.54
Consumer Electronics/Appliances91.75%1.95
Consumer Electronics/Video Chains155.48%2.24
Consumer Specialties92.25%1.04
Department/Specialty Retail Stores83.54%1.49
Diversified Commercial Services50.40%6.08
Diversified Financial Services72.81%5.15
Diversified Manufacture78.36%4.01
EDP Services104.67%23.45
Electric Utilities: Central47.28%5.72
Electrical Products76.09%6.01
Electronic Components62.49%2.23
Electronics Distribution10.20%2.07
Engineering & Construction69.18%1.09
Environmental Services69.21%7.16
Finance Companies40.90%0.91
Finance/Investors Services26.05%3.94
Finance: Consumer Services56.96%14.29
Fluid Controls63.58%3.46
Food Chains50.46%0.31
Food Distributors52.08%1.47
Forest Products85.21%0.51
Home Furnishings75.83%1.93
Hospital/Nursing Management93.04%1.71
Industrial Machinery/Components95.75%6.81
Industrial Specialties74.91%6.54
Integrated oil Companies61.53%1.73
Internet and Information Services59.87%5.19
Investment Bankers/Brokers/Service58.67%8.57
Investment Managers76.15%6.62
Life Insurance35.40%2.91
Major Banks51.71%3.04
Major Chemicals56.96%3.12
Major Pharmaceuticals59.83%7.75
Managed Health Care47.05%14.97
Marine Transportation60.64%2.12
Medical Electronics53.99%3.86
Medical Specialties81.53%4.89
Medical/Dental Instruments90.51%10.17
Medical/Nursing Services74.13%3.11
Metal Fabrications90.06%3.98
Misc Health and Biotechnology Services0.00%6.78
Motor Vehicles116.73%4.65
Multi-Sector Companies59.62%10.34
Natural Gas Distribution50.47%3.55
Office Equipment/Supplies/Services66.02%3.66
Oil & Gas Production62.40%8.51
Oil Refining/Marketing55.74%0.93
Oil/Gas Transmission31.62%4.62
Oilfield Services/Equipment67.36%3.29
Ophthalmic Goods95.78%14.57
Ordnance And Accessories77.24%3.82
Other Consumer Services42.07%7.38
Other Metals and Minerals89.21%2.56
Other Pharmaceuticals50.76%0.92
Other Specialty Stores127.77%2.30
Other Transportation0.00%6.15
Package Goods/Cosmetics70.48%4.22
Packaged Foods42.61%2.17
Plastic Products41.00%1.31
Pollution Control Equipment54.28%1.65
Power Generation53.62%4.74
Precious Metals53.43%2.50
Precision Instruments50.53%5.01
Professional Services57.43%2.18
Property or Casualty Insurers46.69%1.01
Radio And Television Broadcasting And Communications Equipment123.14%5.59
Real Estate Investment Trusts75.58%17.62
Real Estate94.77%12.69
Recreational Products/Toys55.84%2.54
Rental/Leasing Companies87.89%5.31
RETAIL: Building Materials66.18%1.15
Retail: Computer Software & Peripheral Equipment73.85%17.18
Savings Institutions47.66%5.35
Service to the Health Industry78.43%2.00
Services or Misc. Amusement & Recreation29.34%5.50
Shoe Manufacturing97.13%2.50
Specialty Chemicals12.36%7.31
Specialty Foods47.76%4.52
Specialty Insurers66.80%3.01
Steel/Iron Ore60.14%2.19
Telecommunications Equipment59.15%6.19
Television Services97.80%5.95
Transportation Services47.51%0.99
Trucking Freight/Courier Services68.96%2.00
Trusts Except Educational Religious and Charitable21.76%0.79
Water Supply71.57%5.22
Wholesale Distributors84.71%3.75

Key Takeaways

  • Launching a business requires understanding essential elements such as valuations and revenue models to ensure future success.
  • Revenue can be generated in various ways, from subscription-based models to purchasing in bulk.
  • Transactional models usually don't fare as well as those with recurring revenues when it comes to achieving higher equity multiples.
  • Revenue multiples are used when determining the value of a business and provide baseline results.
  • Businesses displaying a 10x or more valuation indicated the highest chances of growth, profits, and expansion - especially SaaS companies.
  • The value of your business is closely linked with your margins and revenue model.  


[ fi-nans, fahy-nans ]

  the management of revenues; the conduct or transaction of money matters generally. In our business, the finance function is about ensuring the sustainability of the business by way of managing Revenue, Expenses, Profit, Assets, Liabilities, Capital, Taxes



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