Monday, July 1, 2013

Lesson #148: How to Research Industry Valuation Multiples

Posted By: George Deeb - 7/01/2013


& Comment

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 vs. people-powered businesses!!

Petsky Prunier's monthly research reports can be freely accessed on their website.   And, to join their monthly email distribution list for these reports, simply send an email to 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.  So, 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.

And, 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 will need to calculate the multiples yourself, based on available data online.

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Samuel Drake said...

Thus, formal Business Valuation Services are highly analytical works that must consider every possible contributor to the value of a business.

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