Gross revenue multiple

Definition

A price expressed as a multiple of sales rather than of earnings.

Why It Matters

It is the crudest of the common multiples and the one most often quoted to a first-time buyer, because it needs no adjustment and hides everything that matters. Two businesses at the same revenue multiple can differ by half in what they actually pay an owner. Use it as a sanity check against the earnings multiple you are really underwriting, never as the price, and be suspicious when a listing leads with it, since revenue survives a weak year looking almost unchanged while earnings do not.

In numbers: A 0.6x revenue multiple on $2M of sales is $1.2M, which is 4x earnings at a 15% margin and 8x at 7.5%.