How to value a small business in India
Revenue multiples, asset-based valuation, and why the standard Western formulas don't always apply to Indian SMEs.
Valuing a small business in India is part science, part local knowledge. The textbook discounted cash flow (DCF) approach works well for listed companies with predictable revenue, but most Indian SMEs operate in ways that make DCF unreliable.
The Revenue Multiple Approach
The most common method for Indian SME acquisitions is the revenue multiple — essentially, how much is a buyer willing to pay per rupee of monthly revenue.
Typical multiples by category:
These multiples are not fixed — they adjust based on city, lease terms, years in operation, and how clean the financials are.
City Adjustments
A café in Bengaluru or Mumbai commands a 10–15% premium over the same business in a Tier-2 city, simply because the buyer pool is larger and the perceived stability is higher.
Lease Terms Matter More Than You Think
If the lease has less than 24 months remaining without a renewal option, expect a 5–10% discount on the valuation. A long, locked-in lease (5+ years at a reasonable rent) can add significant value.
Why CA-Audited Financials Change Everything
Unverified seller-reported numbers are discounted heavily by experienced buyers. A business claiming ₹5L/month revenue with no documentation is valued very differently from the same business with a CA-audited P&L. The certification premium is real — typically 10–20% above an otherwise equivalent unverified listing.
The Nexown Valuation Tool
Nexown's free AI valuation tool applies these multiples automatically based on your inputs. It's not a substitute for proper due diligence, but it gives you a calibrated starting range before you make an offer.