Valuation
How much is a company with $5 million in EBITDA typically worth?
The illustrative range for a $5 million EBITDA company and what changes at this size: platform buyers, deeper diligence and more complex terms.
By Michael D. Rubin, CEO & Founder · September 2026 · 893 words
Using the three-to-seven-times adjusted EBITDA range that most often applies to companies with $3 million to $100 million in revenue, a company with $5 million in adjusted EBITDA would illustrate at roughly $15 million to $35 million in enterprise value. The gap between those two numbers is $20 million, and what closes it is mostly the strength of the management team, the quality of the earnings and how many serious buyers compete.
This is arithmetic, not a promise. What follows explains what changes once a company reaches this size, and why those changes decide where in the range it sells.
The illustration in numbers
At $5 million of adjusted EBITDA, each full turn of multiple is worth $5 million of price: 3x is $15 million, 4x is $20 million, 5x is $25 million, 6x is $30 million and 7x is $35 million. Because each turn is so large, a modest change in how buyers see risk moves the price by millions.
Adjusted EBITDA means earnings before interest, taxes, depreciation and amortization, with owner-specific and one-time costs added back and a market salary deducted for any role the owner fills. At this size the figure will be tested by the buyer's outside accountants, so it has to be one you can defend line by line. The result is enterprise value; debt, working capital, escrow and any deferred payments come off before you see cash.
The buyers change at this size
A company earning $5 million a year is large enough to be a platform: the first acquisition a private equity group makes in an industry, which it then grows by buying smaller companies. Platform buyers can pay more than add-on buyers because they are buying a base to build on, but they expect a management team that can run a larger company without the founder. Strategic buyers, including larger competitors and companies from outside Texas looking to enter the state, are active at this size too. Individual buyers become rarer because the price is beyond what most can finance.
The structure of offers changes as well. Private equity offers frequently include rollover equity, meaning you keep a minority stake in the new company and share in the gain if the buyer sells it later. That can add value, but it is not cash, and its terms need as much attention as the price.
What buyers expect to see
Buyers at this level bring professional teams: their own accountants, attorneys, lenders and often industry consultants. They are paying tens of millions of dollars and answering to their own investors, so they document everything. A company that meets the expectations below gets through that scrutiny with its price intact. One that falls short usually still sells, but with more of the price shifted into earnouts, escrow or a lower multiple.
| Area | What buyers expect at $5 million of EBITDA |
|---|---|
| Financial statements | Accrual-basis statements, ideally reviewed or audited by a CPA, that reconcile to tax returns |
| Quality of earnings review | An outside accounting firm, hired by the buyer, tests EBITDA and every add-back |
| Management | A general manager or leadership team who can run the company without the founder |
| Customers | No single customer large enough to threaten earnings if lost, and a record of retention |
| Reporting | Profit visible by job, product, customer or location, so buyers see where it comes from |
| Growth plan | A credible path for the next owner: new markets, services or further acquisitions |
Where the $20 million gap is won or lost
- Earnings that survive the quality of earnings review. An add-back the buyer's accountants reject reduces price by several times its amount.
- A team that stays. Buyers pay more when the managers who run the company are committed to staying after the sale.
- Margins. Margins above those of similar companies suggest pricing power and a well-run operation.
- Competition. A single interested private equity group sets its own price. Several competing groups, plus a strategic buyer, set a market price.
- Terms. At this size the split between cash at closing, rollover equity, earnout and escrow can matter as much as the multiple.
Expect a deeper process
Larger deals are examined more closely: a detailed data room, a quality of earnings review, legal, insurance and sometimes environmental diligence, and a longer purchase agreement. Our typical timeline of three to nine months from engagement to funds wired still applies, but each step carries more work. Starting a year or two ahead with pre-exit consulting means fewer surprises when the buyer's accountants arrive.
Owners at this size also ask whether they need an investment bank rather than a broker or M&A advisor. This comparison explains the differences so you can judge any firm, including ours.
How MDR & Associates approaches a company this size
A company with $5 million in EBITDA is well within the $3 million to $100 million revenue range we represent through our sell-side service. We go to our own database of private equity groups, capital groups and qualified buyers first, negotiate multiple letters of intent at the same time, and a principal of the firm is in every negotiation. In 2023 MDR & Associates was named to the Axial Advisor 100, among the lower middle market advisors most referred by the buy-side. To see where your company might sit in this range, contact us for a free, confidential discovery meeting and opinion of value.
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