What Multiple of Earnings Should I Sell My Business For?

What Multiple of Earnings Should Your Business Sell For?

When business owners ask “what is my business worth,” what they’re really asking is: what multiple of my earnings will a buyer pay? The multiple — applied to SDE or EBITDA — determines your sale price. Understanding what drives multiples up or down gives you a roadmap for maximizing what you receive.

What Is an Earnings Multiple?

A multiple is simply a number you multiply by your earnings to determine value. If your business generates $300,000 in SDE and sells at a 3x multiple, the sale price is $900,000. At a 4x multiple, it’s $1.2 million. The difference between a 3x and 4x multiple is $300,000 — real money that is entirely determined by how well you’ve built and positioned your business.

Typical Multiples by Business Size

As a general rule, multiples increase with business size:

• Under $500K SDE (small business): 2x–3.5x SDE
• $500K–$1M SDE (lower middle market): 3x–5x EBITDA
• $1M–$3M EBITDA: 4x–7x EBITDA
• $3M+ EBITDA: 6x–10x+ EBITDA (private equity territory)

Larger businesses trade at higher multiples because they represent lower risk — they have management teams, diversified customers, and proven systems that don’t depend on any one person.

Industry-Specific Multiple Ranges

Industry matters enormously. In Northeast Florida’s current market:

• Home services with recurring revenue (pest control, HVAC maintenance): 4x–7x
• Healthcare practices: 5x–8x
• Technology/MSP businesses: 5x–9x
• Restaurants and food service: 2x–4x
• General retail: 2x–3x
• Professional services (law, accounting, consulting): 3x–6x

What Drives a Higher Multiple?

Buyers pay premium multiples for businesses that are low-risk and high-confidence. The specific factors that push your multiple toward the top of the range:

• Recurring revenue: Contracts, subscriptions, or maintenance agreements that renew automatically
• Low customer concentration: No single customer representing more than 10–15% of revenue
• Documented processes: Written SOPs, employee training materials, and systems that allow the business to run without the owner
• Growth trajectory: Consistent year-over-year revenue and earnings growth
• Clean financials: Well-documented books that are easy for a buyer to verify
• Strong management team: Key employees who will stay through the transition

What Compresses Your Multiple

Owner dependency is the single biggest multiple-killer. If the business can’t function without you, a buyer is buying a job, not an investment — and they’ll price it accordingly. Other multiple compressors: customer concentration, undocumented financials, deferred maintenance, declining revenue, and regulatory or legal issues.

Maximize Your Multiple Before You Sell

Ryan C. Winter helps St. Augustine business owners identify the specific factors limiting their multiple — and make strategic improvements before going to market. Contact us for a confidential conversation about what your business is worth today and what it could be worth with the right preparation.

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• Should I Use a Business Broker to Sell My Business in St. Augustine?
• Should I Use a Business Broker to Sell My St. Augustine Business?
• How to Increase the Value of Your Business Before You Sell

• Category: Business Valuation, Selling a Business