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What's the best valuation metric for financial data and technology companies?


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Derek Quackenbush
Title: CFO
Company: Rising Data Solutions
(CFO, Rising Data Solutions) |

I'm not sure, to be honest; every time I've tried to ask a similar question I get the response, "it depends." But a good place to start is comparable transactions involving companies similar to the one you're working with. And of course any public company comps, too. There are other factors to consider--growth rates, profitability (which would juice an EBITDA multiple, of course), unique IP/patents, etc. You might also solicit a pitch from one or more investment bankers who would include thoughts on valuation and approach. Hope this helps a little bit.

Dave Morrison
Title: CFO
Company: Shopatron, Inc.
(CFO, Shopatron, Inc.) |

It depends on whether the company is public or private. In the case of public companies, the market itself answers the valuation question. For privately held companies, the most broadly used measure is EBITDA multiple. Other measures that are important for young (unprofitable or barely profitable) companies are revenue multiples, lifetime value per customer.

Bryan Shaw
Title: Independent Consultant
Company: Bryan Shaw & Associates
(Independent Consultant, Bryan Shaw & Associates) |

Dave Morrison makes a great point about young/unprofitable companies since his comments point to "potential" rather than history. There is a an excellent top level summary of the lifetime value per customer at Digital Marketeer's Avinash Kaushik' s blog: He even has a zip file to help you set up the excel data to compute & some data gathering requirements. (I liked the "traps to avoid" when you analyze your data.) Very pragmatic information to use in your overall valuation scheme, but it is only a part of that scheme. Use all of scheme to tell your company's good story - Revenue multiples, LTV, EBITDA multiples, Operational cash flow, growth in deferred revenue balances, etc.


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