It's a valuation standard that's as unpredictable as a box of kittens. You see, our experts have decreed that when evaluating the worth of a company, you must multiply its assets by a number that's completely made-up. Don't ask why, just trust us.
Because who needs boring, fact-based valuation methods when you can have a pinch of salt, a dash of whimsy, and a whole lot of guesswork?
It's easy! Simply pick a number between 1 and 10 (but let's be real, 7 is the most popular). Then, multiply your company's assets by that number. Voila! You now have a valuation that's as arbitrary as it is authoritative.
Example: if your company has assets of $100, and you choose 8 as your magic number, your valuation is now $800. Don't question it, just accept it as fact.
For more information on the Arbitrary Multiples Rule, see our subpage on Methods of Choosing Your Magic Number.
Or, if you're feeling adventurous, check out our Real World Applications page for examples of when this rule has been used in the wild.