Valuation Multiple

Definition

A valuation multiple is a factor applied to a financial metric — such as annual revenue or earnings — to estimate the market value of a business or professional practice. In accounting firm M&A, practices are commonly valued at a multiple of gross revenue or seller's discretionary earnings, with higher multiples awarded to firms that demonstrate predictable, recurring income and strong operational systems. The specific multiple offered by a buyer reflects perceived risk, growth potential, and client retention likelihood.