Great question and often see each lender having a bit of different opinion.
Most often I see banks looking at the 3 year average but can provide additional weight to most recent year with detailed explanation on why that would be more predictive of future revenues/EBITDA than the average. In this case would want as much supporting information on assurance on enrollment for 2021, likelihood for similar enrollment in post Pandemic world, etc. (this will be similar information that a business valuation firm would need in their analysis which will often be needed in lending situation). Other items to focus on:
- Motivation of sellers
-Industry experience of buyers
- Overall Equity Injection
- Seller Note(s) to possibly bridge the gap in historical valuation vs. most recent year/projections

I would always take the 3 yr position otherwise you can overvalue the company on an exceptional year

I wouldn't take an average, but try to strip out the covid effect. So[redacted]growth rate on 2019 would be a reasonable assumption for normalised[redacted]and I'd start with that.

Also, might make sense to adjust EBITDA to setup where you would run the business. If e.g. previous owner hasn't taken full market level salary etc. your should adjust accordingly to make the equation work for you.

There could be some risk in going off of 2020 and 2021 numbers. On the one hand, it’s great that more customers have discovered the business’s products and its market share has expanded. On the other hand, it’s almost impossible to overstate the fatigue with respect to online learning among students, parents, teachers, and administrators. I wouldn’t be surprised if the whole market for online learning products were to crash (or at least falter) once everyone goes back to in-person learning.

This is where the market research portion of DD comes in. Is this a COVID blip or is this trend going to continue upwards? Its most likely both

I agree with Mike. I wouldn’t just take the average, but I would make a top line adjustment to revenue based on your best estimate of what the COVID effect was. That should give you a better estimate of the long term potential of the business