How the valuation
range is calculated

Small hosting businesses are bought for their recurring revenue, so the model values annual recurring revenue (ARR) rather than turnover or profit. ARR is estimated from the two revenue answers:

ARR = annual revenue x (recurring revenue % / 100)

The indicative range is then ARR multiplied by a low and a high multiple. Both multiples start from the same base and are moved up or down by the quality of the business.

Base multiple range = 0.80x to 1.40x ARR

low multiple  = 0.80 + sum of low adjustments
high multiple = 1.40 + sum of high adjustments

Valuation low  = ARR x low multiple
Valuation high = ARR x high multiple

Adjustments are additive, expressed in multiples of ARR (so +0.10 means "plus a tenth of one year's recurring revenue"). After all adjustments, both multiples are clamped to a floor of 0.35x and a ceiling of 1.70x so that unusual combinations of answers cannot produce an implausible number. If the high multiple ends below the low multiple, the two are set equal.

New sales are valued as the recurring revenue they add in a full year, measured against the existing base. The ARPU band supplies a mid-point monthly figure (for example £20 - £50 uses £35).

New ARR = new customers per year x ARPU mid-point x 12

Implied organic growth % = (New ARR / ARR) x 100

That percentage is then matched to a growth band below. It is a gross figure: it does not net off churn, which is assessed separately as a quality adjustment. Where revenue or new customers are zero, no growth adjustment is applied.

Annual revenue        £400,000
Recurring             90%           ARR = £360,000
Trading 10-20 years                 low +0.06   high +0.10
Direct SME customers                low +0.05   high +0.08
Churn 5-10%                         low +0.06   high +0.10
Gross margin 50-60%                 low +0.08   high +0.12
Average tenure 5-10 years           low +0.08   high +0.10
No customer over 5%                 low +0.08   high +0.12
UK hosting provider                 low +0.04   high +0.05
Recurring 90%+                      low +0.15   high +0.20
ARPU £20-£50 (mid £35)              low +0.07   high +0.10
Platforms cPanel + WHMCS            low +0.09   high +0.11  (cap 0.12)
300 new customers x £35 x 12 = £126,000 new ARR
= 35% implied growth                low +0.15   high +0.22

low multiple  = 0.80 + 0.91 = 1.71 -> clamped to 1.70
high multiple = 1.40 + 1.30 = 2.70 -> clamped to 1.70

Indicative range = £360,000 x 1.70 = £612,000

The example deliberately shows the ceiling in action: a business scoring well on every measure is capped at 1.70x ARR, because beyond that point a real transaction depends on diligence rather than a questionnaire.