SOP 55: Trailing-12 Average vs. Last-3-Months — Reading Revenue

SOP 55: Trailing-12 Average vs. Last-3-Months — Reading Revenue

Which revenue window you trust changes the price by thousands. Use the right one per situation.

— Use the trailing-12-month average as the default valuation base. It absorbs seasonality and one-off spikes. This is what a fair multiple multiplies.
— Use the last-3-month average ONLY to detect trend direction against the 12-month figure. If last-3 is below trailing-12, the asset is declining — discount the multiple. If above, confirm the lift is structural (new rankings), not a viral fluke.
— Seller tactic to catch: listing at 'last month x 12'. A single strong month annualized inflates the price 30–50%. Reject it; re-base on trailing-12.
— Seasonality rule: for seasonal niches (tax, holiday, fitness), require a full 24 months so you see both peaks and troughs.

Pass criterion: price anchored to trailing-12, with last-3 used only as a trend signal.

Save this — run it every deal.