Probably not. While various public companies may be trading at multiples of 10, 20 or even higher, a closely held firm usually doesn’t have the resources to justify higher multiples. For the typical public company, these would include size, the ability to raise capital, a well structured, integrated management team and last but not least the availability of buyers. Determining how a firm correlates to one in the public market is complex, requires considerable professional analysis and is probably not cost effective for most small and mid-size firms. An initial earnings multiple may be acceptable as an expression of interest, but a professional valuation is best in all circumstances.
Are earnings multiples a good approach to setting a value on my business?
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