A small (sub $1m in annual revenue) services company will typically sell on some multiple of "seller discretionary earnings" - basically; how much cash can the owner operator take out in a year (including their own salary). A "typical" multiple would be 2-4x SDE.
A larger services company will typically sell on some multiple of EBITDA (earnings before interest, taxes, depreciation and amortization). The main way this differs from the above is that the owners/CEO salary is not included. Traditionally the multiples here has been 4-6x EBITDA (which is what a "value oriented" private equity fund will seek to pay), but recently there is so much dry powder in the private equity world that those multiple has been pushed up, particularly for technology companies. 6-10x is not unheard of, more is possible.
A product or software (especially SaaS) company might sell on a multiple of gross revenue instead of earnings. Depending on how profitable the company is, this may or may not be a higher value than the above EBITDA multiple. Above a certain size, I would expect a SaaS company to sell for at least 3-4x revenue, more if growth is strong, even more for larger businesses.
In general you'll see multiples go up for a) strategic fits for larger acquirers (eg they can sell your product to their existing customers) b) growth and c) larger revenue companies.
This latter point might be confusing - why would a larger company not only get a higher price because the earnings/revenue is higher, but also get a higher multiple of that revenue? This "multiple expansion" occurs because there are (lots) more available capital to buy larger companies. Smaller companies are riskier and also the transaction and other costs (operating, optimizing) are similar for a $100m vs a $10m deal. There is also more leverage available at better terms for buyers of large companies.
And you'll need to be easily replaceable.
(The term of art is SDE/Seller's Discretionary Earnings, and is basically the sum of all the money the owners are able to take out of the business, including paychecks and bonuses.)
FEI and other brokers write a bunch about valuing small businesses: https://feinternational.com/blog/how-do-you-value-an-online-...
It seemed like a non traditional route as it wasn't the usual X earnings multiplied by a time period.
I think we as a society need to stop referring to single member entities with no employees (meaning a single, sole person) as a "company."
"Business" seems like a better term, or even just "product" if that's what you're selling. But "company" naturally implies multiple people, which lends credence to the business as it means the business can support more than one income.
I think the reason this comment is so disliked is because it's strongly worded as if the original word usage was a horrible, systemic mistake.
> we as a society need to stop
This is unnecessary. Sure, the vocabulary choice would probably be improved a bit with "business", but it really didn't take away from the story. If not for it saying "one-person" in the title, it might haven taken slightly longer to process "Oh, solo entrepreneur, got it" vs "small company with a few employees" - which is not totally insignificant. It's a bit of a difference between a personal choice that affects one person vs. a leader and some followers who are being taken down a different path.
This is a significant reason why you would lack consensus on this opinion.
In the UK my mother was the company secretary for my Fathers company he used for consulting.
