Last week on MBA Mondays, I talked about valuing an internet marketplace business. In that post, I talked about using 1x gross marketplace transactions and 20x EBITDA as multiples to determine value. In the comments, I was asked about multiples for other sectors. That's a good question so I figured I'd show how to calculate multiples for various sectors.
For this exercise we will focus on the software as a services (SAAS) sector. The first thing you need to do is find a universe of publicly traded companies to use for your model. I found this blog post and used a subset of the companies on the list.
The next thing you do is create a spreadsheet with a bunch of companies on it. I decided to use five SAAS companies in my model; Salesforce, NetSuite, Constant Contact, Taleo, and RightNow. The spreadsheet with these five companies is here.
To read the full, original article click on this link: A VC: Determining Valuation Multiples
Author:Fred Wilson
