Buyers price most private businesses as a multiple of earnings — but the multiple varies widely by industry. Recurring revenue, licensing barriers and buyer demand push some sectors far above others. Here are the typical ranges and what actually moves them.
In the lower middle market, EBITDA multiples generally run about 4–9× depending on the industry. Home services tend to fall around 4–6×, manufacturing around 5–7×, professional services around 4–7×, and healthcare services around 5–9×.
Recurring-revenue software commands a premium above these ranges because of its predictability and defensibility, while restaurants and thin-margin retail tend to sit at the bottom.
A multiple is really a measure of risk and durability. Sectors with recurring revenue, high switching costs, regulatory barriers and active acquirer demand trade higher because a buyer's future cash flows are more certain.
Smaller, owner-operated businesses are usually valued on SDE (seller's discretionary earnings) at lower multiples, while larger, professionally managed businesses are valued on EBITDA at higher ones.
Growth rate, margins, customer concentration and owner-dependence decide where you land inside your industry's band — and occasionally beyond it.
A business with clean, growing, well-documented earnings that runs without the owner earns the top of its range. One that depends on the founder and a single big customer earns the bottom.
For lower-middle-market businesses, roughly 4–9× depending on industry — home services around 4–6×, manufacturing 5–7×, healthcare 5–9×. Recurring-revenue software trades higher; restaurants and thin-margin retail lower. These are indicative ranges, not guarantees.
A multiple reflects how certain and durable a buyer thinks your future earnings are. Recurring revenue, regulatory barriers and strong buyer demand raise multiples; volatility, thin margins and owner-dependence lower them.
Our Business Valuation service turns this into a defensible result.