Business Ratios
Eight numbers that tell you what a business is really worth, and which two of them decide whether to walk away. A listing on Listings.sg carries them under its price when the seller has stated the figures they need.
What each ratio means
Only rent burden and lease cover are colour coded. The rest depend on what you intend to do with the business, so we show them and leave the judgement to you.
| Ratio | Think of it as | Worked out as | What it tells you |
|---|---|---|---|
| Profit multiple | Like a P/E ratio on a share | asking ÷ annual profit | How many years of profit the asking price represents. A business asking S$150,000 on S$75,000 of annual profit is a 2.0 multiple, so two years of profit buys it. |
| Payback | The same thing, counted in months | multiple × 12 | The multiple expressed in months, which is easier to hold against a lease. Under 36 months is generally healthy for a small Singapore business. |
| Yield on price | Like rental yield on a property | annual profit ÷ asking | What the business returns each year against what it costs to buy, before you pay yourself anything. It is the multiple turned upside down, and it is the figure to compare against other places you could put the money. |
| Owner's yield | What is left after paying yourself a wage | (profit − role salary) ÷ asking | Most small business profit is really the owner's wage. This takes out what the owner's role would cost to replace and shows what is left. Positive means you bought a business. Negative means you bought yourself a job. |
| Rent burdenColour coded | Like an expense ratio | annual rent ÷ annual revenue | How much of the takings goes straight to the landlord. It is the number that quietly decides whether a shop survives a slow quarter, which is why it is one of the two we colour. |
| Revenue growth | Compound annual growth | (latest ÷ earliest)^(1 ÷ years) − 1 | The average yearly change in revenue across the years the seller has stated. Shown only when there are at least two years, because one year is a number, not a direction. |
| Net margin | Cents of profit per dollar of sales | profit ÷ revenue | How much of the revenue survives as profit. Normal margins differ sharply by trade, so this one is always read against its own trade rather than against other listings. |
| Lease coverColour coded | Like years to maturity on a bond | lease months left ÷ payback months | Whether the lease lasts long enough to earn the purchase price back. Below 1.0 the lease runs out first, which means the renewal terms matter more than the asking price. The other ratio we colour. |
Worked example: a cafe in Yishun
Every ratio on one business, with the arithmetic written out, so you can check each number yourself.
- Asking price
- S$150,000
- Annual profit
- S$75,000
- Annual revenue
- S$480,000
- Monthly rent
- S$5,500 (S$66,000 a year)
- Lease left
- 15 months
- Owner's role, if you hired it
- S$48,000 a year
| Ratio | Working | Result |
|---|---|---|
| Profit multiple | 150,000 ÷ 75,000 | 2.0× |
| Payback | 2.0 × 12 | 24 mo |
| Yield on price | 75,000 ÷ 150,000 | 50% |
| Owner's yield | (75,000 − 48,000) ÷ 150,000 | 18% |
| Rent burden | 66,000 ÷ 480,000 | 14% |
| Net margin | 75,000 ÷ 480,000 | 16% |
| Lease cover | 15 ÷ 24 | 0.6 |
Owner's yield is the one that needs a number the listing does not state. It takes the S$48,000 it would cost to pay someone to do the owner's job off the profit first, then divides by the price. That is the difference between buying a business and buying yourself a job. Revenue growth is left out because this example states one year of revenue, and one year is a number, not a direction.
What is normal, by trade
A 3x multiple is ordinary for a tuition centre and steep for a minimart, so a ratio is only readable against its own trade.
| Trade | Profit multiple | Net margin | Rent burden | Owner salary used |
|---|---|---|---|---|
| Food & Beverage | 1.5 to 3x | 10 to 20% | under 15% | S$48,000 |
| Retail | 1.2 to 2.5x | 5 to 15% | under 15% | S$42,000 |
| Beauty & Wellness | 1.5 to 3x | 15 to 30% | under 18% | S$42,000 |
| Services | 2 to 3.5x | 20 to 40% | under 12% | S$54,000 |
| Online & Tech | 2 to 4x | 20 to 45% | under 10% | S$60,000 |
| Trade & Industrial | 1.5 to 3x | 8 to 20% | under 12% | S$54,000 |
| Franchise | 2 to 4x | 8 to 18% | under 15% | S$48,000 |
Lease cover uses one band for every trade: 1 and above is comfortable, 0.7 to 1 is tight, below 0.7 means the lease runs out before you earn the price back. Payback under 36 months is generally healthy.
What listings are actually asking
Median across listings published in the last 90 days. Each figure counts only the listings that state the inputs it needs, which is why the counts differ between columns.
Food & Beverage
2 listings- Profit multiple
- 1.0xn=1
- Payback
- 12 mon=1
- Rent burden
- 12%n=1
- Net margin
- 10%n=1
Retail
2 listings- Profit multiple
- 0.7xn=2
- Payback
- 8 mon=2
- Rent burden
- 23%n=2
- Net margin
- 11%n=2
How this is worked out
- Ratios are computed from what the seller has stated on the listing. A missing figure is left blank and never treated as a zero, so a business that has not stated its rent shows no rent burden rather than a flattering one.
- Owner's yield assumes a salary to replace the owner's own role, shown in the table above. It is an assumption, not a fact, and you can change it on any listing.
- Figures are the median, not the average, so a single unusually large business does not distort a whole trade.
- A trade and region is only shown in the quarterly table once it has at least 5 listings in the quarter.
- These are asking prices. What a business finally sells for is private between the parties.