The number, the hidden value and focusing on the output.

Multiples get thrown around like they mean something on their own. “We sold for 5x.” “They’re worth 3x revenue.” Founders hear it, anchor on it, and quietly start valuing their own business off a number they’ve completely stripped of context.

A multiple is shorthand. It compresses a whole valuation (the profit, the risk, the growth, the certainty of the cash flows) into a single figure. Quote the figure without the substance underneath, and you’re not sharing information; you’re sharing a number that can lead you badly astray.

Graham Stephen is CEO and co-founder of bizval, a valuation firm that has run thousands of valuations across multiple markets. A chartered accountant by training, he’s blunt about how badly multiples mislead founders who read them the wrong way round.

The biggest error is using a multiple to value your business: slapping “5x” on your profit and calling it a valuation. It works the other way. You value the business properly first, and the multiple falls out of that as a result.

“The multiple is the output of a valuation, not the input. People use it backwards; they pick a multiple and multiply, when the multiple should fall out of the actual valuation.”

“3x” is meaningless until you know what it’s three times. A multiple of revenue and a multiple of earnings are wildly different things.

Whenever you hear a multiple, pin down the base. Revenue? Earnings? EBITDA? Someone quoting a big revenue multiple and someone quoting a modest earnings multiple might be describing identical businesses or completely different ones. Without the base, the number is noise.

Two businesses with the same profit can carry very different multiples, because the multiple silently prices everything else: how reliable the earnings are, how fast the business is growing, how dependent it is on the owner or one customer, how certain the future looks.

So when someone got a higher multiple than you, it usually isn’t because they negotiated harder. It’s because the business underneath was less risky or faster-growing. The multiple is a scoreboard for all of that at once. Read it as a summary of the risk and quality, not a target to hit.

A lot of the multiples founders see quoted online come from the US, and SA businesses generally trade at lower multiples than comparable American ones. Anchor on a US number and you’ll either wildly over-value yourself or feel cheated by a perfectly fair local offer.

The same business genuinely is worth a different multiple in different markets, because the risk, the buyer pool and the cost of capital differ. Read multiples against the market you’re actually in, not the headline numbers from a bigger one.

Multiples do have a use as a rough sanity-check against comparable businesses, a way to ask “am I in the right ballpark?” That’s legitimate. Treating one as your actual valuation is not.

Let the real valuation come from the fundamentals (the cash flows and the risk around them) and use multiples to pressure-test whether the answer looks sane against the market. That’s reading a multiple without fooling yourself: as one input to your judgement, never the whole of it.

This is one piece of Business Valuation for Founders, Graham’s full masterclass inside the Founder Collab. It’s part one of a three-part series that takes founders from understanding their numbers to actively growing them:

You’ll also get access to 40+ other masterclasses from SA founders and operators on sales, fundraising, UX, paid media and more inside The Founder Collab.

Get more SA tech and business news, tips and business-building workflows and subscribe to The Open Letter.