Valuation
What valuation multiple might buyers pay for my business?
The multiple range buyers most often pay, the factors that move a company within it, and a worked example with caveats.
By Michael D. Rubin, CEO & Founder · September 2026 · 908 words
For a profitable company with $3 million to $100 million in revenue, buyers most often pay three to seven times adjusted EBITDA. Where your business lands in that range depends on its size, growth, customer mix, recurring revenue, management depth and how many buyers compete for it.
A multiple is only as good as the earnings it is applied to, so the number beneath it matters as much as the multiple itself.
What the multiple is applied to
Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization, restated to remove owner-specific and one-time items and to reflect a market salary for the role the owner fills. It is the standard measure for companies of this size, because it shows what the business earns for an owner who will hire management.
Smaller owner-operated businesses are often priced on SDE, seller's discretionary earnings, instead. SDE includes the owner's full pay, so it is a larger number, and the multiples applied to it are lower. Mixing the two, for example applying an EBITDA-style multiple to SDE, produces a price no buyer will pay.
Before looking at multiples at all, make sure the adjusted EBITDA itself is sound. Every add-back should have a paper trail, the books should tie to the tax returns, and any unusual year should be explained. A buyer will test all of it, and an adjustment that fails costs you the multiple times the amount.
What moves a company within the range
| Factor | Pushes toward the lower end | Pushes toward the higher end |
|---|---|---|
| Size of earnings | Smaller adjusted EBITDA | Larger adjusted EBITDA, which draws private equity and strategic buyers |
| Owner dependence | Owner holds key relationships and decisions | A management team runs daily operations |
| Customers | One or two customers make up a large share of revenue | A broad base with no dominant customer |
| Revenue type | One-off projects | Recurring contracts or repeat orders |
| Trend | Flat or declining results | Steady growth with a credible plan |
| Records | Books that do not reconcile to tax returns | Clean, consistent monthly financials |
| Competition | One buyer negotiating alone | Several qualified buyers bidding at once |
A worked example
Take a company with $1.5 million in adjusted EBITDA. At the bottom of the range, three times, the indicated enterprise value is $4.5 million. At the top, seven times, it is $10.5 million. The same company could plausibly fall anywhere between, depending on the factors above and on how the sale is run. That spread, $6 million on identical earnings, is why the factors matter so much. Put another way, each full turn of the multiple on $1.5 million of earnings is worth $1.5 million to the owner, which is why moving from four to five times can be worth more than a year of growth.
This is an illustration, not a promise. The figure is enterprise value, before debt is repaid and before adjustments for cash and working capital, and before taxes and fees. It also says nothing about structure: a price paid partly through an earnout, meaning future payments tied to performance, or through seller financing is not the same as cash at closing.
Why the multiples you read online mislead
Multiples quoted for public companies or very large deals are not a guide for a private company with $10 million in revenue. Industry averages hide large differences between strong and weak companies in the same field. And a friend's sale price may have included real estate, an earnout or a different measure of earnings. Our article on what your business is worth explains how to read these numbers and what to ignore. In the end, the only multiple that counts is the one competing buyers actually offer for your company.
Different buyers, different multiples
The same company can draw different prices from different kinds of buyer. A strategic buyer that can remove duplicate costs or sell more to your customers may pay toward the top of the range, because it expects to earn more from the company than you do today. A private equity group prices on the return it can earn, often using borrowed money, and cares most about management and steady cash flow. An individual buyer using SBA financing is limited by what the loan can support, which can cap the price.
Knowing which of these groups is most likely to want your company tells you which part of the range is realistic. A process that reaches all of them gives you the best chance at the top.
How to move up the range
The factors in the table are not fixed. Over 12 to 24 months an owner can build a management layer, widen the customer base, put service agreements in writing and clean up the books. Our pre-exit consulting is designed for exactly that period.
At the point of sale, the biggest single lever is competition: a process that produces multiple letters of intent (written offers stating price and terms) at the same time, so buyers bid against each other rather than against your patience. Our process is built around that step.
What we do at MDR & Associates
In a free, confidential discovery meeting we review three years of financials, recast your earnings and give you a low-to-high opinion of value, with the reasons your company sits where it does. We tell you which factors a buyer will price in and which you can still improve before going to market. For a quick first range, use the free valuation snapshot.
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