Our Valuation Methodology
A transparent look at how Valzura calculates business worth — from data sourcing to risk adjustments.
Where Our Data Comes From
Valzura's valuation multiples are derived from three primary categories of data. First, we aggregate completed transaction records from published M&A databases that track actual sale prices of small and mid-market businesses. Second, we incorporate deal data shared by business brokerages and intermediaries who report anonymized sale-to-earnings ratios. Third, we reference publicly available industry reports and economic surveys that benchmark typical multiples by sector.
Each industry in our database — from restaurants to SaaS companies — has its own calibrated multiple range based on sector-specific transaction data. We review and update these ranges regularly to reflect changes in buyer demand, interest rates, and macroeconomic conditions.
Our Three-Method Approach
Professional valuators rarely rely on a single method. Valzura applies three approaches simultaneously to triangulate a defensible value range. Each method measures a different dimension of business worth.
1. SDE Multiple Method
Seller's discretionary earnings (SDE) represent total financial benefit available to a single owner-operator. We calculate SDE by starting with net income and adding back owner compensation, non-recurring expenses, depreciation, amortization, and interest. The SDE multiple — typically 1.5x to 4x for small businesses — is then applied based on your industry, size, and risk profile.
2. EBITDA Multiple Method
EBITDA (earnings before interest, taxes, depreciation, and amortization) measures operational profitability independent of capital structure. Unlike SDE, EBITDA does not add back owner compensation, making it the standard metric for businesses with professional management. EBITDA multiples range from 3x to 12x depending on industry, scale, and growth trajectory.
3. Revenue Multiple Method
Revenue multiples value a business as a ratio of its annual revenue. This method is critical for high-growth companies, pre-profit startups, and industries like SaaS where revenue multiples are the primary valuation benchmark. Revenue multiples vary dramatically — from 0.2x for low-margin service businesses to 6x+ for high-growth recurring-revenue companies.
How We Calculate Multiples
For each of the 52 industries in our database, we maintain a calibrated range of multiples for SDE, EBITDA, and revenue. When you enter your financial data, Valzura selects where your business falls within that range based on quantitative risk factors.
The formula is straightforward: Estimated Value = Earnings Metric × Industry-Adjusted Multiple. The complexity lies in selecting the right multiple — which is where our risk adjustment framework provides the most value. View our complete guide to valuation multiples for a deeper explanation with examples.
Risk Adjustment Framework
Not all businesses within the same industry deserve the same multiple. Valzura adjusts the applied multiple based on five quantitative risk factors that buyers and appraisers consistently evaluate:
Owner Dependency
Businesses heavily dependent on the owner face higher transition risk, compressing the multiple.
Customer Concentration
Revenue concentrated in a few accounts increases acquisition risk and reduces the multiple.
Revenue Trend
Growing revenue supports higher multiples; declining revenue compresses them.
Profit Margin
Margins above the industry average signal operational efficiency and support premium multiples.
Business Age & Stability
Established businesses with long operating histories receive multiple premiums over newer operations.
Limitations & Disclaimers
Valzura is an estimation tool designed to provide a reasonable starting point, not a definitive valuation. Key limitations include:
- Our multiples are based on aggregated industry data and may not reflect unique circumstances of your specific business.
- Qualitative factors — brand strength, intellectual property, key employee contracts, real estate value — are not fully captured by automated analysis.
- Local market conditions, current buyer demand in your geography, and deal structure (asset sale vs. stock sale) significantly influence actual transaction prices.
- Our tool does not constitute financial, legal, or tax advice. Results should not be relied upon for legal proceedings, tax filings, or binding transactions.
For high-stakes decisions — business sales, divorce proceedings, partnership buyouts, or estate planning — we recommend engaging a certified valuation professional (CVA, ASA, or ABV credential holders).
Frequently Asked Questions
Where does Valzura get its valuation multiples?
Our multiples are aggregated from published M&A transaction databases, business broker deal records, and publicly available industry reports. We review and update ranges regularly to reflect current market conditions.
How accurate is an automated business valuation?
Automated valuations provide a reasonable estimate based on industry benchmarks and your financial inputs. They are most useful as a starting point — accurate to within a range — but cannot account for every qualitative factor. For transactions above $1M, we recommend supplementing with professional appraisal.
Why do you use three methods instead of one?
Each method captures different aspects of value. SDE multiples reflect total owner benefit, EBITDA multiples measure operational profitability, and revenue multiples capture growth potential. Using three methods produces a more defensible valuation range than any single approach.
What risk factors does Valzura adjust for?
Our risk adjustment framework considers owner dependency, customer concentration, revenue trend (growing vs declining), profit margin relative to industry average, and business age. Each factor shifts the applied multiple up or down within the industry range.
Is Valzura a substitute for a certified business appraisal?
No. Valzura is an estimation tool for informational purposes. Certified appraisals (ASA, CVA, ABV credentials) involve on-site analysis, detailed financial normalization, and professional judgment required for legal proceedings, IRS compliance, or formal M&A transactions.
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