One method is chosen, not averaged
A valuation that blends every method into an average hides the one decision that matters. AltosIQ selects a single primary method for each business and states why, then cross-checks the result against a second approach and shows both figures side by side.
The choice is driven by the shape of the business, not by preference: whether it is distressed, whether its assets outweigh its earnings, whether it is growing fast enough that revenue is the better measure, and how large it is. The method chosen and the reason for it are computed together in one pass and saved with the valuation — so a report cannot later explain a method it did not use.
The methods
Market approach
What businesses like this one actually sold for.
Income approach
What the future cash is worth today.
Asset approach
What the balance sheet supports.
Early-stage methods
For businesses without meaningful earnings history.
Where the multiple comes from
The multiple applied to earnings is drawn from current market transaction data — a survey in which business brokers report the deals they actually closed. Not asking prices. The distinction matters: most of what is freely available online is what a seller wanted, and the gap between that and what a buyer paid is large and systematic.
Where enough transactions exist in a business's own sector, the multiple comes from that sector: 137 sectors, drawn from 9,574 reported closed sales. A sector is only used when it carries at least ten reported sales — below that the figure is one or two transactions, which is an anecdote rather than a benchmark, and we fall back rather than quote it.
Where a sector has no usable sample, the multiple is applied by deal size instead, because at this end of the market size predicts the multiple more strongly than sector does. A business with $400,000 of earnings and one with $1.5m do not trade at the same multiple even in the same industry.
Every report names the source and the period it reflects, so the figure can be checked rather than taken on trust.
The discount rate is built, not assumed
Where an income approach is used, the discount rate is assembled from five components and each is printed with its own source. Two are real external data. Three are derived from the business, and are labelled as derived — never dressed up as published research.
Then the business is adjusted for its own risk
A market multiple describes a category. It does not describe this business. Two companies with identical earnings are not worth the same amount, so the concluded value is adjusted for factors specific to the company. Each adjustment applied is itemised in the report with its direction and size.
What we do not do
A methodology is defined as much by its limits as by its methods. These are ours, stated plainly, because you will find them out eventually and it is better that you hear them here.
We do not present individual comparable transactions
Sector multiples are aggregates — the average across every reported sale in that sector, not a median, and the report says which. We do not claim to have matched your business against named transactions, because we have not. The number of sales behind each figure is stated so you can judge how much weight it carries.
We do not audit the financials
The valuation is built on figures supplied by the business and its adviser. Reports classify the evidence those figures rest on, but classification is not verification and an audit is a different engagement entirely.
We do not use asking prices
Listing data is abundant and free, and it measures what sellers hoped for. It has no place in a valuation a lender will read.
We do not flatter the business
Declining revenue is described as declining revenue. Where a figure is not known, the report records that it is not known rather than filling the gap with something plausible.
Everything is recorded, not recomputed
The method, the reason it was chosen, the discount-rate build-up, the risk adjustments and the triangulation are all saved with the valuation at the moment it is issued. Opening a report a year later shows the same figures it showed on the day it was signed — an issued opinion cannot move under the client who relied on it.