Guide
Company valuation calculator: what a multiple can and cannot tell you
Updated
Every free company valuation calculator does the same thing: it multiplies one of your numbers by a figure it chose for you. It is worth knowing where that figure comes from, because it is the entire answer.
Request valuation quotes Two minutes of questions, then relevant valuation firms scope the work and quote for that specific engagement.
What a calculator is actually doing
A valuation calculator takes a profit figure, most often EBITDA or adjusted net profit, and multiplies it. Everything that makes the result right or wrong is in the multiple, and the multiple is the one input you did not supply. The arithmetic is trivial and correct; the judgement is invisible and borrowed.
Where published industry multiples come from, and what they omit
Industry multiples are averages drawn from completed transactions or from quoted company ratios. Both are real data and neither describes your company, for reasons that do not average out:
- Size. A business turning over a few hundred thousand and one turning over twenty million do not trade at the same multiple, and an industry figure blends them.
- Owner dependence. A company whose relationships, technical knowledge or licences sit with one person is worth materially less to a buyer than the same numbers with a management team, and this is the commonest reason a real offer lands under a calculator's output.
- Customer concentration. One client at 40% of revenue changes the risk, and therefore the multiple, whatever the sector average says.
- Quality of earnings. Recurring contracted revenue and project revenue are not the same earnings even when they are the same number.
- What was actually in the deal. Reported transaction multiples often cover deals with earn-outs, deferred consideration and retained debt. The headline figure and the cash at completion are different sums.
None of this makes multiples useless. It makes them a sense check on a valuation rather than a substitute for one, which is the opposite of how a calculator presents them.
Why this site publishes no multiples table
No official UK source publishes industry valuation multiples. The figures that circulate come from commercial databases and broker commentary, and they are not comparable with one another because they measure different deal populations on different definitions of earnings.
Reproducing a table of them here would give it an authority it does not have and would invite exactly the calculation this page is arguing against. Where a number is needed for a real purpose, the route is a valuation of your company, not an average of other people's.
When arithmetic is not enough
For tax there is a defined standard rather than a market convention. HMRC's Shares and Assets Valuation team handles valuations for tax purposes and publishes how to approach them (gov.uk), and its manual sets out the statutory open market basis on which unquoted shares are valued, including the statutory provisions and the hypothesis underlying them (gov.uk, Shares and Assets Valuation Manual).
A calculator output has no standing in that context, nor in a shareholder dispute, a divorce, an EMI option grant or a negotiation with a funded buyer. What those need is a valuation somebody has put their name to and can defend, which is a different product with a different price, and that price is what this site is about.