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Size moves your multiple more than anything you control

The best-supported finding in SME valuation is also the least useful advice: bigger businesses sell for more. Here is the evidence, and why the causal version of it is probably wrong.

6 min readMarginGraph

If you read one finding in this field and ignore the rest, read this one. Bigger businesses sell for higher multiples of the same earnings, and unlike almost everything else written about SME valuation, it replicates.

Here is what it looks like in money. Brookz surveys Dutch M&A advisors, and in the first half of 2025 they reported an average of 3.5 times EBITDA for businesses at €200,000 of normalised earnings, and 4.1 times at €1m. So €200,000 of earnings values the business at €700,000, and €1m values it at €4.1m. Of the €3.4m difference, €2.8m is simply having more earnings, and €600,000 comes from the multiple itself moving.

That second number is what everyone means by the size effect. It also comes with a caveat most articles quietly drop, and the caveat is the reason the finding is less actionable than it sounds.

The evidence

GF Data collects transactions confidentially from private equity buyers rather than from sellers' agents, which makes it the least conflicted source available. Its cumulative figures through 2024:

Enterprise valueAverage EBITDA multipleTransactions
$10m – $25m5.9×2,076
$25m – $50m6.7×1,592
$50m – $100m7.7×1,087
$100m – $250m8.5×615
$250m – $500m9.9×91
All6.9×5,461

Four turns between the smallest and largest band, on five and a half thousand deals. In the third quarter of 2025 GF Data measured the gap between platforms above $100m and platforms below $100m at 2.8 turns, from 211 transactions through the first nine months of the year, contributed by 437 private equity firms.

The gradient continues below that range. In the first half of 2025, GF Data put deals of $1m to $5m enterprise value at roughly 5.5× and the $10m to $25m tier at 6.2× to 6.7×, describing the gap in its own words as "nearly a full turn."

Now the same pattern, collected four other ways:

  • Netherlands. Brookz surveys Dutch M&A advisors twice a year. In the first half of 2025 their reported averages ran from 3.5× at €200,000 of normalised EBITDA to 6.7× at €10m.
  • United Kingdom. BDO's index, built from a third-party company register rather than a survey, put trade acquisitions at a median enterprise value of £14.5m and 9.4× in the first quarter of 2024, against private equity deals at a median £42m and 11.5×.
  • Eurozone mid-market. The Argos Index, covering unlisted companies between €15m and €500m of equity value, read 8.6× in the first quarter of 2026, sitting well above every SME-scale reading.
  • United States, smaller deals. BizBuySell's marketplace data, at a median sale price of $350,000, gives a median cash flow multiple of 2.61×.

Broker surveys, buyer reports, a company register and a marketplace, in four countries. They disagree about levels, for reasons covered in where these multiples come from. They agree about the gradient.

Why the causal version is probably wrong

Here is the sentence you will read everywhere: grow your business and your multiple goes up. It does not follow from any of the data above, and it is worth understanding why.

None of these datasets controls for anything. A €20m business and a €500,000 business differ in more ways than size. They sit in different sectors. They have different accounting quality, often audited versus compiled. They have management teams rather than a single owner. And, decisively, they are sold to different buyers.

That reframing matters practically. If the size effect is really a buyer-pool effect, then the lever is not "get bigger" in the abstract. It is "get into the range where more buyers with more financing are looking," which is a different and much more specific target, and one you can decide is not worth pursuing.

Do not import the stock market version

A common move in valuation reports is to justify a size adjustment by pointing at the small-cap premium from public equity research. That literature is contested enough that it will not carry the weight.

Aswath Damodaran, reviewing it in 2015, found the smallest decile beating the market by 4.33% between 1926 and 2014, but noted the premium "was strong prior to 1980, it seems to have dissipated since 1981," and that "almost all of it is earned in one month of the year, January, and removing that month makes it disappear." His forward-looking implied cost of equity ran 7.61% for small caps against 7.95% for large caps, which is the wrong sign entirely. He concluded that a 3% to 5% small-cap premium "lacks empirical justification."

There is a serious rebuttal. Asness and colleagues argued in 2018 that the size premium's problems "disappear when controlling for the quality, or its inverse, junk, of a firm," and that once you do, it is "stable through time" and appears "in 30 different industries and 24 international equity markets."

Both sides are worth knowing, and neither is about your business. The published size premia for the smallest decile of listed companies reach double digits, but the same source warns that those sub-deciles contain "many large (but highly leveraged) companies with small market capitalizations." An 11% premium derived from distressed micro-caps is not transferable to a debt-free plumbing business with €2m of revenue.

What to do with it

Find out which side of a buyer-pool boundary you are on. The specific number matters less than whether your earnings put you in the range where private equity and lenders are active. That is a question you can answer, and it changes who you should be talking to.

Do not accept a size adjustment without a stated population. If someone applies a discount to your business because it is small, ask which dataset, which band and which country. The gradient is real. Any specific adjustment is an interpolation between figures with no published confidence intervals.

Treat growth as worth having on its own merits. More earnings at the same multiple is already worth more money. Whether the multiple also moves is a bonus nobody can quote you a price for.

What this does not tell you

The size effect is a fact about populations, not a prediction about your transaction. A well-run small business with a strong customer base and a management layer can sell for more than a larger, messier one. The gradient describes averages across thousands of deals, and there is enormous spread inside each band that none of these publishers reports.

And every dataset here suffers the same blind spot: it contains only businesses that found a buyer. Whether small businesses fail to sell more often than large ones would tell you something important about the real cost of being small, and no source can answer it.

Where your business sits, and why

The report states which size band your figures put you in, which comparables apply, and what that does to the range. Every assumption visible.

Business Valuation report — €9

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