The whole benefit of this method is that its simple.
Its first order of magnitude estimation by taking the fact that headcount is usually close to linear with revenue and then applying maybe the next biggest twiddle. So you get maybe 80% accuracy recognizing the linear trend, and then another correction for the valuation.
As such, even 1 correction is kind of twiddly, since it does pretty good with average salary. But, its also in that range where you can do it off the top of your head in conversation, by simply referencing a well known labor number, and a +/- factor that most entrepreneur folks you're having drinks with will know.
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The whole benefit of this method is that its simple. Its first order of magnitude estimation by taking the fact that headcount is usually close to linear with revenue and then applying maybe the next biggest twiddle. So you get maybe 80% accuracy recognizing the linear trend, and then another correction for the valuation.
As such, even 1 correction is kind of twiddly, since it does pretty good with average salary. But, its also in that range where you can do it off the top of your head in conversation, by simply referencing a well known labor number, and a +/- factor that most entrepreneur folks you're having drinks with will know.