How many times profit is a business worth?
Two to six times normalised earnings for most owner-managed businesses — but 'profit' has to mean the right thing, and reported net profit almost never does.
Two to six times, for most owner-managed businesses. But the word profit is doing dangerous work in that sentence: the figure being multiplied is normalised operating earnings, not the net profit line in your accounts.
Why reported profit is the wrong base
Net profit is after interest, after tax and after whatever compensation structure suits your circumstances. All three are decisions of the current owner and none carry over to a buyer. That is why valuation uses EBITDA or SDE — figures deliberately stripped of financing and ownership choices.
- Reported net profit
- €96,000
- after interest and tax
- EBITDA
- €247,000
- the figure the multiple applies to
Applying a 5× multiple to the wrong line here produces €480,000 instead of €1.24M.
The bands
| Normalised earnings | Typical multiple | Why |
|---|---|---|
| Under €500k | 2–4× | Individual buyers, high owner dependence |
| €500k – €2M | 4–6× | Management layer, broader buyer pool |
| Above €2M | 5–8× | Institutional buyers, competitive process |
Within each band, movement comes from concentration, growth, revenue quality and owner dependence — covered in EBITDA multiple explained.
If your figure includes your salary
Then you are holding SDE, and the multiple is 2 to 3.5× rather than 4 to 6×. SDE vs EBITDA covers the distinction and why mixing them is the most expensive mistake in the process.