Fair Market Value (FMV) Valuation
Estimate Business Valuation using Revenue and EBITDA multiples. Enter values for instant results with step-by-step formulas.
Formula
Valuation = Metric × Multiple\nAvg Value = (Val_Rev + Val_EBITDA + Val_PE) / 3
Relative valuation relies on comparing your metrics to similar companies. EBITDA is the most common metric for profitable mature businesses, while Revenue is used for high-growth startups.
Worked Examples
Example 1: SaaS Startup
Problem:$1M Revenue, $0 EBITDA.
Solution:6x Revenue Multiple.
Result:Valuation: $6,000,000.
Frequently Asked Questions
Is this FMV?
Fair Market Value is the price a willing buyer and seller agree upon. Fair Market Value (FMV) Valuation estimates that price based on market norms.
Background & Theory
Which Multiple to Use?
- EV/Revenue: Best for high-growth startups or loss-making companies.
- EV/EBITDA: Best for mature, capital-intensive, or profitable businesses. Proxy for operating cash flow.
- P/E (Price to Earnings): Best for stable, low-growth companies and public stocks.
SDE vs EBITDA
For small businesses (<$5M Revenue), buyers often use SDE (Seller Discretionary Earnings) instead of EBITDA. SDE adds back owner salary and perks. This calculator's "EBITDA" field can be treated as SDE for small biz.
Liquidity Discount
Private companies usually sell at a 20-30% discount to public peers because you can't instantly sell the stock (Illiquidity Discount).
History
The Art of Valuation
Valuation is "Art and Science". Historically, Discounted Cash Flow (DCF) was the gold standard. However, DCF relies heavily on predicting the future. In the 1980s, private equity popularized "Relative Valuation" (Multiples) as a faster, market-based reality check.
The Rule of 40
In modern SaaS valuation, the "Rule of 40" (Growth Rate + Profit Margin) heavily influences the multiple. High growth companies command massive revenue multiples even if unprofitable.