Map revenue ranges to scores for business evaluation
When screening dozens of small businesses, revenue alone is a blunt instrument — but bucketed into scores it becomes a fast filter. Here's a simple, defensible framework.
Why score instead of rank
Absolute revenue rewards size over quality. Scoring within bands lets you compare a $300K coffee shop against a $2M restaurant on the same 1–5 scale.
Suggested revenue score bands
Score 1: under $100K annual revenue — pre-viable, high risk.
Score 2: $100K–$500K — proven but sub-scale.
Score 3: $500K–$1.5M — sustainable operator income.
Score 4: $1.5M–$5M — scalable, financeable.
Score 5: over $5M — mature, acquirable at healthy multiples.
Blend with margin and growth
Revenue score alone misleads. Combine with gross-margin score (1–5) and 3-year CAGR score (1–5). A weighted average produces a comparable 'business health' number.
Use the score to filter, not decide
Scores tell you what deserves an hour of diligence. The final decision still requires financials, references, and time with the operator.
Frequently asked questions
- Should the same score bands apply to every industry?
- No — restaurants and SaaS have very different revenue norms. Recalibrate bands per vertical for meaningful comparisons.
- Is revenue or EBITDA a better score input?
- EBITDA (or SDE for main-street) is better if you have it. Revenue is a fast proxy when you don't.
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