BuildExitReady, an advisory division of 7Mills
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Valuation multiple

Also known as EBITDA multiple, earnings multiple, EV/EBITDA multiple, multiple of earnings

A valuation multiple is a number applied to a business's profit (or sometimes its revenue) to estimate what the whole company is worth: a business making EUR 1m in adjusted annual profit, valued at a multiple of five, has an indicative value of around EUR 5m. The multiple used reflects how buyers of similar companies have recently priced risk, size and growth prospects.

Why it matters at exit

The price at exit is the multiple times the profit figure it is applied to, so the multiple is one of only two levers on what you actually receive. A change of a single turn (say from four times to five times earnings) on a business making EUR 1m of profit adds around EUR 1m to the sale price for the same trading performance. Multiples are not set by sector alone; buyers pay more for businesses that carry less risk, which is where the qualities measured across the 7 Mills (owner-independence, repeat revenue, documented processes, a management team that stays) affect the number. Two businesses with identical profit can sell for very different sums because one is judged safer and easier to own.

Relates to the Mill Competitive Value →

Frequently asked questions

What multiple will my business sell for?
It depends mainly on your industry, your size and how risky the business looks to a buyer. Owner-managed companies in the EUR 2m to 10m revenue range often change hands at roughly three to six times adjusted EBITDA (a measure of operating profit), though the range varies widely by sector and deal. Businesses that trade without the owner and hold steady, repeat revenue tend to sit at the higher end.
How do I raise the multiple rather than just grow profit?
You raise the multiple by removing the reasons a buyer sees risk. The same profit earns more when the business does not depend on you personally, keeps reliable accounts, has its key processes written down, holds contracted or repeat revenue, and has managers who will stay on after the sale.

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