EBITDA multiple
The factor applied to adjusted earnings to produce enterprise value, set mainly by size, industry, growth, and how dependent the business is on its owner.
Also called: Earnings multiple · Valuation multiple
The multiple is shorthand for everything a buyer believes about risk and durability. Two companies with identical earnings can trade at very different multiples because one has forty customers on multi-year contracts and a general manager, and the other has three customers and an owner who signs every quote.
Size is the strongest single driver. Multiples generally step up as earnings grow, because the buyer pool changes: below a few hundred thousand of SDE the buyer is an individual with an SBA loan, in the low millions of EBITDA it is search funds and independent sponsors, and higher still it is institutional private equity with cheaper capital and a mandate to deploy. The same business is worth more to the pool one tier up, which is why growth to the next tier is often worth more than a year of margin improvement.
After size, the drivers that move the multiple most in small-company deals are recurring or contracted revenue, customer concentration, management depth below the owner, margin stability, and the quality of the financial records. Nothing on that list is a surprise, and all of it is improvable with twelve to twenty-four months of deliberate work.
Why the same earnings are not the same price
Company A: 1.2M adjusted EBITDA, 3 customers, owner sells and quotes every job, cash-basis books
Company B: 1.2M adjusted EBITDA, 60 customers on annual contracts, GM in place, reviewed financials
Identical earnings, materially different risk — and buyers price the risk, not the earnings line.
Where sellers get caught
- Anchoring on a multiple you read in an article about deals ten times your size.
- Assuming the multiple applies to revenue. It applies to the agreed earnings base, and confusing the two produces wild expectations.
- Forgetting that the multiple produces enterprise value, not the money that reaches your bank account.
Common questions
Can you tell me my multiple?
Not responsibly, and not from a page. The multiple depends on your financials, customer mix, team, and the buyer pool your size attracts. Serava does not promise a valuation, price, buyer, sale, or timeline.
What raises a multiple fastest?
Usually reducing owner dependence and customer concentration, then making the financial records reliable enough to survive a quality of earnings review. Those three change the risk a buyer is pricing; a good year of revenue on its own often does not.
Related terms
EBITDA
Operating profit before financing, tax, and non-cash charges, used as the earnings base most buyers of lower-middle-market companies price against.
Adjusted EBITDA
EBITDA restated to remove one-off, non-market, and non-recurring items so the number reflects how the business will run under a new owner.
Enterprise value
The value of the business itself, independent of how it is financed — and not the amount the seller receives.
Revenue multiple
Enterprise value expressed as a multiple of annual revenue, used mainly where margins are standardised or earnings are not meaningful.
Discounted cash flow
A valuation method that projects future free cash flow and discounts it to present value at a rate reflecting the risk of those cash flows.
Customer concentration
The share of revenue coming from the largest customers — one of the most common reasons a buyer discounts a price or restructures a deal.
Guides that use this term
Where ebitda multiple comes up in a real sale, and what it changes.
Last reviewed 2026-08-25. General information for business owners, not legal, tax, or financial advice — terms, thresholds, and tax treatment vary by jurisdiction and by deal.