What is my business worth based on revenue?
A revenue multiple values a business at a fraction or a multiple of its annual turnover — so a business turning over £800,000 on a 0.8× multiple is priced at £640,000. It is the quickest sum in valuation and the least informative, because revenue says how much money passes through a business, not how much stays. Two businesses with identical turnover can be worth completely different amounts, and this page shows exactly where that difference comes from.
The sum itself
There is no complexity in the arithmetic:
value = annual revenue × revenue multiple
On £800,000 of turnover:
| Multiple | Implied value |
|---|---|
| 0.5× | £400,000 |
| 0.8× | £640,000 |
| 1.0× | £800,000 |
| 1.5× | £1,200,000 |
| 2.0× | £1,600,000 |
The entire argument is the multiple, and the multiple is a judgement, not a fact. Anyone quoting you a single revenue multiple without asking about your margins is quoting you a guess.
Why identical revenue gives different answers
Two businesses, both turning over £800,000:
| Business A | Business B | |
|---|---|---|
| Revenue | £800,000 | £800,000 |
| Cost of sales | −£240,000 | −£600,000 |
| Overheads | −£360,000 | −£160,000 |
| Operating profit | £200,000 | £40,000 |
| Value at 4× profit | £800,000 | £160,000 |
| Implied revenue multiple | 1.0× | 0.2× |
Same turnover, five times the value. That is the whole case against pricing on revenue: the multiple is doing all the work, and what it is silently encoding is the margin. When somebody says “businesses like yours go for about 1× revenue”, they are really saying “businesses like yours usually make about this margin” — and if yours does not, the number is wrong in whichever direction flatters them.
When revenue multiples are actually used
They are not always the lazy option. There are cases where revenue genuinely is the better base:
- Recurring-revenue businesses. Where income is contracted and renews, revenue is predictable enough to price directly, and the multiple reflects churn and contract length.
- Loss-making or barely profitable businesses. A profit multiple on £5,000 of profit produces a meaningless number; revenue at least measures something real.
- Businesses being bought for what they own, not what they earn — a customer base, a location, a licence. The buyer is not buying your profit, so pricing on it misses the point.
- Very early or fast-changing businesses where last year’s profit tells you nothing about next year’s.
Outside those, a profit-based figure is more defensible — and a buyer’s adviser will convert to profit anyway, so you may as well arrive with the conversion already done.
What actually moves your multiple
Whether the revenue is worth 0.5× or 2× turns on how safe it looks to whoever is buying:
| Factor | Pushes the multiple up | Pushes it down |
|---|---|---|
| Margin | High and stable | Thin, or falling |
| Recurrence | Contracted and renewing | One-off projects, won again each time |
| Customer concentration | No customer above roughly a tenth of revenue | One customer is a third of it |
| Owner dependence | Runs without you | The relationships are yours personally |
| Direction of travel | Growing, with a reason | Flat or declining |
Every one of those is something a buyer will test in due diligence — and every finding becomes a reason to pay less rather than a reason to walk away. That is the thing to understand about the process: it is repricing, not an exam.
Do this instead
Use the revenue multiple as a sanity check, not as the answer:
- Work out normalised profit. Start from operating profit, add back genuine one-offs, and adjust owner pay to what it would cost to replace you — only the excess over a market-rate salary is an add-back, not the whole of what you pay yourself.
- Apply a range of profit multiples, not one, so you end with a range you can defend.
- Divide the result by your revenue. That gives your implied revenue multiple.
- Compare it to whatever multiple you were quoted. If they are far apart, the gap is the conversation — and now you are the one holding the arithmetic.
For the profit side of that, see how to value a small business and SDE vs EBITDA.
Arithmetic and general information only — not financial, tax, legal or investment advice. Your own figures, and your own accountant, decide what any of this means for you.
Do the quick version free
free business valuation calculator — run the profit-based sum as well and compare the two — where they disagree sharply is the part of your business a buyer will want explained. It runs in your browser and nothing you type is sent anywhere.
The number after debt and cash
The Business Valuation Workbook ($39) goes further than the free calculator above it: five add-back categories rather than owner pay alone, and the step from enterprise value through debt and cash to the equity figure that would reach you. Two linked Excel sheets, run on your own machine. Every row of it is shown on the page before you buy.
See inside the toolkit first
The Business Sale Readiness Toolkit sample shows every sheet, every row of the inputs sheet and the actual Excel formulas — no email, no account. If the sample is not worth your afternoon, the full workbook will not be either.
If you want the readiness assessment too
The Business Sale Readiness & Valuation Toolkit ($499) is a full valuation model with a sensitivity table across multiples, a weighted readiness assessment across the ten areas a buyer examines, a preparation checklist and an adviser prep summary. One-time purchase, instant download.
Frequently asked questions
How do you value a business based on revenue?
Multiply annual revenue by a revenue multiple. A business turning over 800,000 at a 0.8 multiple is valued at 640,000. The arithmetic is trivial; the multiple is a judgement, and it silently encodes the margin the buyer expects.
What is a typical revenue multiple for a small business?
There is no single figure that means anything without the margin. Two businesses with identical turnover but different margins can differ five-fold in value, so any multiple quoted without reference to your profitability is a guess.
Is it better to value a business on revenue or profit?
Profit, in most cases, because it measures what the business keeps rather than what passes through it. Revenue is the better base for recurring-revenue businesses, for businesses making little or no profit, and where the buyer is acquiring assets rather than earnings.
Why do two businesses with the same revenue sell for different amounts?
Because the multiple prices risk and margin, not turnover. Stable high margins, contracted recurring income, low customer concentration and low owner dependence all raise it. Thin margins, one-off projects and a concentrated customer base lower it.
Does a revenue multiple include debt?
A multiple usually produces an enterprise value, which is the value of the business before its own borrowings and surplus cash are taken into account. What ends up with the seller depends on how debt and cash are treated in the deal structure.