How to Research Industry Valuation Multiples



As we learned back in Lesson #32 (How to Value Your Startup), in order to properly value your own business, you need to have a good sense to valuations for similar companies in your industry. To accomplish this, you will need to research the ever-changing industry-average revenue or EBITDA multipliers for similar companies in your industry, determined either by the multiples of publicly traded companies or the multiples paid for similar companies in private sale transactions.

For all you digital companies out there, I wanted to share a terrific resource provided by Petsky Prunier, a boutique investment bank with expertise in the digital space. Every month, the analysts at Petsky Prunier research the current multiples for both the public companies and the private sale transactions in the digital space. Furthermore, in addition to overall data, they do a really nice job of separating out the valuations and multiples by different subsets of the digital space, including: (i) Digital Media/e-Commerce; (ii) Digital Advertising; (iii) Marketing Technology; (iv) Agency & Marketing Services; (v) Traditional Media; (vi) Technology; (vii) Software; (viii) Communications; and (ix) Information & Business Services.  As an example, notice the big difference in valuations between technology-powered businesses versus people-powered businesses!

Petsky Prunier’s monthly research reports can be freely accessed on their website. To join their monthly email distribution list for these reports, simply send an email asking them to add you to their email list.

I hope you find Petsky Prunier’s research as valuable as I do when valuing digital companies. But I know valuing businesses can often be more of an art than a science when traditional multipliers may not apply. If you have any questions on what your business is worth, do not hesitate to ask, either by email or via the comments field below.

For all you startups that are not in the digital space, hunt down similar research reports or investment banking research analysts that may be available for your specific industry. Or you can calculate the multiples yourself based on available data online.

This article was originally published on RedRocket VC, a consulting and financial advisory firm with expertise in serving the start-up, digital and venture community.

Image credit: CC by marco_1186

About the author: George Deeb

George Deeb is a managing partner at Red Rocket Ventures, a Chicago-based startup consulting and fundraising firm with expertise in advising Internet-related businesses. More of George’s startup lessons can be read at “101 Startup Lessons — An Entrepreneur’s Handbook.”

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