Why do we talk about “multiples” in business valuation?

When an entrepreneur wants to sell their business, the first question that often comes up is: how much is it worth?

A common method is to apply a multiple to a financial metric such as EBITDA , net income, or revenue. This multiple reflects the value the market assigns to each dollar of performance.

About the data presented

The multiples listed here are average estimates based on reliable sources such as PitchBook, BizBuySell, MidStreet, and Corporate Finance Institute. They vary based on several factors and are not a substitute for a personalized professional evaluation.

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How are multiples determined?

Multiples depend on several factors, including:

• The size of the company

• Income stability

• Profitability

• The sector of activity

• Dependence on the founder

• Growth potential

• The perceived level of risk

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Multiple means depending on the size of the company

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Multiple means by sector of activity

For further information, also check out BizBuySell's industry multiples reports

Concrete example of valuation

A manufacturing company generates annual EBITDA of $1.5 million. It has a stable order book, an established team, and specialized equipment. Due to its well-established structure, it was sold at a multiple of 5.2x, or $7.8 million.

This type of multiple is common in the manufacturing sector for companies between $2 million and $10 million in revenue.

What causes the sales multiple to vary?

What can increase the multiple:

• Recurring and predictable revenue

• Diverse clients

• Well-established systems and processes

• Low dependence on the owner

• Stable growth history

• Expanding sector

What can decrease the multiple:

• Unstable or seasonal income

• Strong dependence on one client or channel

• Lack of succession plan

• Tax or legal issues

• Sector in decline

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FAQ: Valuation and Sales Multiples

What is the difference between an EBITDA multiple and a revenue multiple?

The EBITDA multiple reflects actual profitability after operations. The revenue multiple is simpler but less accurate because it does not take into account operating costs.

Why can two companies in the same sector have different values?

Because every business has unique variables: margins, stability, processes, dependence on the founder, asset quality, etc.

Can I sell an unprofitable business?

Yes, but the multiple applied will be low (often based on assets or potential) unless future growth is demonstrated.

Do franchises sell at a different multiple?

Yes, generally lower than independent businesses, but more predictable. The franchisor's network, reputation, and requirements influence valuation.

Can I value my business myself?

Yes, using tools like our valuation AI and EBITDA calculator, but professional validation is always recommended before listing.

Conclusion

Sales multiples are an excellent starting point for estimating a company's value. However, each case is unique. Use our free tools, explore our platform, and contact us for personalized support at every stage of the transaction.