What a profit multiple actually means

profit multiple = sold price ÷ trailing-twelve-month profit

A business that changed hands for $60,000 having earned $20,000 of profit over the previous twelve months sold at 3×. Read the other way, the multiple is a payback period: at unchanged profit, three years to earn the purchase price back. That framing is the useful one, because it makes the buyer's real question visible — how confident are you that the next three years look like the last one?

Two details decide whether the division is even meaningful. Whose profit? At this deal size "profit" usually means the seller's discretionary earnings — net profit with the owner's own pay and one-off costs added back — and it is nearly always a figure the seller stated rather than one an accountant attested. Which twelve months? Trailing twelve months, ending at the sale; a multiple built on a good quarter annualized is a different statistic wearing the same name.

Annualized months

Most small-marketplace listings publish a monthly profit figure and no annual one. Turning that into a trailing-twelve-month number means multiplying by twelve, which silently assumes a flat year: no seasonality, no growth, no decline, and no month where the ad account got banned. We do that arithmetic where a page gives us no alternative, and we grade the row estimated so it is visible in the data rather than smoothed into it. If you are quoted a multiple built this way, ask for the twelve monthly figures.

A median is not a price

The multiple a category "trades at" is the midpoint of a wide, skewed spread, and the spread is the information. Our calculator therefore quotes an interquartile range — the middle half of comparable sales — rather than a single number, requires at least five comparables before it will show anything at all, and trims 5% from each tail once the sample passes twenty. A point estimate from three deals is not a valuation; it is an anecdote with a decimal point.

The sample decides the number

A multiple is only as representative as the deals it was computed from. Sold prices are published unevenly: certain marketplaces and deal sizes are visible, most private transactions are not. Whenever you are handed a multiple, the load-bearing question is not "how big" but "from what" — how many sales, what sizes, which venues, over what period. The table below publishes ours, sample sizes included.

"With a profit figure" is how many of those sold deals state a profit on the page they were cited from — the sample the median is actually computed over. Where it is under five, we publish no median at all rather than a number that would move if one more deal landed.

Not every asset has a profit line to divide by. Domain names — the largest category in our database today — mostly change hands with no operating business attached, so their sales carry a price and a venue and nothing to compute a multiple from. Pre-revenue apps and unmonetized audiences are the same. For those, comparable prices are the evidence, and any quoted multiple is a category error rather than a low number.