Companies across various industries sell for a price based on a multiple of the company’s revenues. These include:
- Tech: Especially high-growth technology companies. Examples include software as a service (SaaS).
- Biotech and Pharmaceutical: Biotech and pharmaceutical firms, particularly those with promising pipelines or breakthrough treatments, based on the large potential for future earnings.
- Retailers: Retail companies with strong brand recognition and consistent revenue streams.
- Consumer Goods: Similar to retailers, companies that produce consumer goods, especially those with strong brand loyalty.
- Subscription-Based Businesses: Any company that operates on a subscription model, such as streaming services like Netflix or other recurring revenue streams.
- Healthcare Services: Companies in healthcare services, such as hospitals or specialized clinics, particularly if they have a strong patient base and consistent income streams.
- Financial Services: Some financial services companies, such as asset management firms or insurance providers, may use revenue multiples in their valuation. However, other metrics like assets under management or earnings are often more relevant.
- Real Estate Investment Trusts (REITs): REITs, which own and often operate income-generating real estate, may be valued based on multiples of their rental revenue or funds from operations (FFO).
- E-commerce: E-commerce businesses with significant growth potential or a unique market positioning.
Specific revenue multiples can vary widely, depending on factors such as industry, growth potential, profitability, and market conditions. Additionally, different buyers may have varying perspectives on which valuation metrics are most important.