What is a good EBITDA multiple?

For an owner-managed business under €2M of EBITDA, four to six times is a common outcome. Below €500,000 of EBITDA it is usually two to four. Above €2M, five to eight, because private equity enters the buyer pool and competition sets the price.

#The bands exist because of the buyer pool

Under €500,000 of earnings the buyers are individuals spending their own money, and there are only so many of them. That is the real reason small businesses trade at lower multiples — not quality, availability of capital.

Under €500k EBITDA

2–4×

individual buyers

€500k – €2M

4–6×

small funds and strategics

Above €2M

5–8×

institutional competition

#What moves you inside the band

Growth, customer concentration, owner dependence and revenue quality — roughly in that order. A business at €600,000 of EBITDA growing 20% a year with 70% contracted revenue can sit at the top of its band or above it. The same earnings from one customer, with the owner holding every relationship, sits below the bottom.

EBITDA multiple explained works through each driver with the typical effect on the number.

#The check worth doing

Take the multiple you are hoping for and ask what a buyer receives for it. At 6×, they hand over six years of current earnings and take the risk that year seven exists. If you cannot make the case for year seven without yourself in it, six is not your number.

Margin is the other half of this — see how profitability affects valuation.