Does 3x sales correspond to the business value?

Simply calculate the business value by multiplying the turnover by 3?
For a few companies in certain industries, the rule of thumb 3 x sales = business value may make sense, but for most it does not. It ignores many things and oversimplifies the reality of business valuation.
Basically, the multiplier method is a modern, useful method that is based on industry comparisons. You can find a multiplier suitable for your industry and company size in the Nimbo market data .
Application of the x-times-sales model
The x-times-sales model is a very easy-to-use method for business valuation. It is based on the assumption that the value of a company is a multiple of its annual turnover.
example calculation
Sales: €500,000
Industry-typical multiple: 3
Business value (500,000 x 3): €1,500,000
Suitable multiple for your industry
Visit the NIMBO Multiples page to find out which multiple is suitable for your company.
Weak points of the 3x turnover method
Increase plausibility: Consideration of additional evaluation factors
The 3x sales model neglects all aspects such as debt, assets or growth potential. We recommend using the 3x sales model as one of several valuation methods and additionally using at least one other method, such as the discounted cash flow method.
Compensate for fluctuations in sales
A temporary increase or decrease in sales leads to a distorted result. In this case, consider the average sales of the last three years or adjust for extraordinary events.
What other rules of thumb are there?
See our separate blog post about rules of thumb .