Mostly Multiples 5/5: The End of an Era

The Big Five are: • Revenue growth from one year to the next • Earnings per share (EPS) • Earnings before interest, taxes, depreciation, and amortization (EBITDA) • Free cash flow (FCF) • Return on total capital (ROTC) or return on equity (ROE). ROE is the right metric for financial businesses such as banks and insurance companies.

different performance measures, such as revenue or cost per ton-mile in the shipping industry or revenue per available room (revpar) in the hotel industry.

The first benchmark we need to check is gross margin. If you remember our mantra from the previous chapter, gross margin needs to be at least 30 percent of net revenue if a business is going to be profitable. Here, it is clocking in at 22 percent. And in order for gross margin to be at 30 percent or higher, COGS needs to be 70 percent or lower.

contracted retained clients make up the bulk of the revenue. EBITDA is another word for profit, used by accountants and financiers to value businesses. If you are at the sharp end of your Agency growth journey, you may have already heard of this description. An EBITDA multiple is used as an indicator of how much a business is worth. At the moment,