The valuation of a business is a mathematical equation.
Valuation = Profit X Multiple
Most people are trained to understand how to calculate the profit in a firm but few understand how to get a value for the multiplier. In all the business plan I have had to review I have not found a section dedicated for the multiplier.
As a company grows what is profit tends to become more complicated. Ask an accountant to tell you and the answer you get is ‘it depends’
To increase the value of a firm , the firm can focus on increasing the profit, the multiplier or both.
The table below illustrates how a company can increase it value
| Item | Asset | Benchmark |
| 1 | Client Base | 1 |
| 2 | Staff, Culture | x 2 |
| 3 | System and Product Innovation | x 3 |
| 4 | Products and Product ecosystem | x 6 |
| 5 | Distribution/Partnership | x 10 |
| 6 | Position/Brand | x 15 |
| 7 | Scale | x 20 |
| 8 | Business Model | x 25 |
One key here is that Income follows assets and influence. The business rents out business assets and gets paid profit. The biggest asset a business can owe is its business model. The Intellectual Property or Product forms a building block of the business model but with the explosion of knowledge a company’s IP or product can be copied.