Revenue vs. EBITDA: What Really Drives Valuations?
Summary
Revenue multiple or EBITDA multiple - what’s the difference? Michael Epstein and Drew Fallon break down how valuations actually work and why revenue multiples often steal the headlines, even when earnings drive the deal.
Transcript
Everyone's always asking, how do I get to a revenue multiple versus an EBITDA multiple? This is Michael, a fantastic question because the answer is they're not different. It's the same thing. Oftentimes companies like the press release will say, you know Ghost Lifestyle is bought for three x sales. The sales multiple is one of two things. It's either a hypothetical earnings multiple or it's an earnings multiple.
Right. Let's just say like we're a company that does 10 million in revenue and we have 20% EBITDA margins. So we're doing 2 million and EBITDA. And we sell for 30 million. That's the sales right. Or is it 15 x EBITDA or is it both? It's both right. The reason that like I always report about the sales numbers because it's the most widely reported multiple like across the brand, it's the easiest way to compare brands.