Startup Funding Espresso -- Calculating Forward Multiples
Calculating Forward Multiples Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. Valuations for software companies with recurring revenue are calculated using forward revenue multiples. While revenue is the primary factor in calculating the multiple, some companies can increase it by demonstrating excellence in other areas. Use these definitions to calculate it: Revenue growth \u2013 revenue this year over last year in a percentage.\xa0 Sales efficiency -- take your increase in gross profit and divide by last year's sales and marketing expenses. Cash flow margins -- divide your cash flow by revenues. Net income margin -- divide net income by revenue. Gross margin -- divide gross margin by revenue. To calculate forward multiples for companies going public, use the following formula: Forward Multiple = 6.3 + 38 x Revenue_Growth + 2 x Sales Efficiency. Revenue growth and sales efficiency provide the most impact.\xa0\xa0 If you have additional value through your margins, you can add them in as well.\xa0 Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let\u2019s go startup something today. ____________________________________ For more episodes from Investor Connect, please visit the site at: \xa0 Check out our other podcasts here: \xa0 For Investors check out: \xa0 For Startups check out: \xa0 For eGuides check out: \xa0 For upcoming Events, check out \xa0\xa0 For Feedback please contact info@tencapital.group\xa0\xa0\xa0 Please , share, and leave a review. Music courtesy of .