If you are thinking about selling your business, one of the first questions you will ask is: what multiple of EBITDA should I expect?
The answer depends on your industry, the size of your business, and a handful of company-specific factors that can swing your valuation by 2-3x in either direction. Here is what you need to know heading into 2026.
How EBITDA Multiples Work
EBITDA multiples express a business's total enterprise value as a ratio of its annual earnings before interest, taxes, depreciation, and amortization. A business generating $1M in EBITDA that sells at a 5.0x multiple would have an enterprise value of $5M.
In the lower middle market — businesses with roughly $1M to $25M in revenue — EBITDA multiples typically range from 3x to 8x, with most transactions falling between 4x and 6x.
But that range is enormous. The difference between a 3.5x and a 6.5x multiple on a $2M EBITDA business is $6 million. So what determines where you fall?
Which Industries Command the Highest Multiples?
Certain sectors consistently trade at premium valuations. In general:
Premium Tiers (Higher End of the Range)
- Software and SaaS — Recurring revenue, high margins, and scalability make these businesses highly attractive to buyers. SaaS companies with strong retention metrics trade at the top of the market.
- Healthcare Services — Aging demographics and recession-resistant demand drive sustained buyer interest in healthcare platforms, clinics, and services businesses.
- Technology Services — IT managed services, cybersecurity, and data analytics firms benefit from long-term contracts and sticky customer relationships.
Mid-Range
- Business Services — Consulting, staffing, marketing agencies, and professional services trade in the middle of the range. Multiples depend heavily on contract structure and client concentration.
- Industrial Manufacturing — Established manufacturers with proprietary products or processes attract steady buyer interest, though capital intensity can compress multiples.
- Construction and Engineering — Strong backlogs and recurring maintenance contracts can push these businesses toward the higher end.
Lower Tiers
- Restaurants and Food Service — High competition, thin margins, and owner dependence typically result in more modest multiples.
- Retail — Brick-and-mortar retail faces structural headwinds, though niche or e-commerce-enabled retailers can outperform.
- Transportation and Logistics — Asset-heavy models and driver/labor challenges put downward pressure on valuations.
Why the Range Is So Wide
Two businesses in the same industry can trade at very different multiples. The factors that move the needle include:
- Revenue Size — Larger businesses command higher multiples. A company with $500K in EBITDA will trade at a meaningfully lower multiple than one with $3M, even in the same industry.
- Revenue Trend — Consistent growth over three to five years is one of the strongest drivers of premium valuations.
- Customer Concentration — If your top client represents more than 25% of revenue, expect a discount. Buyers see this as risk.
- Recurring Revenue — Subscription models, long-term contracts, and maintenance agreements de-risk future cash flows and boost multiples.
- Owner Involvement — A business that depends on the owner's daily involvement is worth less than one with a strong management team in place.
- EBITDA Margins — Higher margins signal pricing power and operational efficiency, both of which buyers pay up for.
These factors can shift a valuation by 1x to 3x in either direction — which is why relying on a simple industry average can be misleading.
EBITDA vs SDE for Smaller Businesses
For businesses with less than $1M in EBITDA, buyers often use Seller's Discretionary Earnings (SDE) instead. SDE adds back the owner's salary and benefits to EBITDA, giving a clearer picture of the total cash flow available to a new owner-operator.
SDE multiples for smaller businesses tend to run lower than EBITDA multiples for larger companies — typically in the 2x to 4x range. This reflects the higher risk, owner dependence, and less transferable value inherent in smaller operations.
How to Get a More Accurate Estimate
Industry averages are a starting point, but your business is not average. The only way to get a meaningful estimate is to factor in your specific financials, growth trajectory, customer base, and operational characteristics.
Our free AI-powered valuation calculator analyzes your business across all of these dimensions and benchmarks it against real lower-middle-market transaction data. It takes two minutes, requires no sign-up, and gives you a data-driven range — not just a generic industry multiple.
Get your free business valuation →
If you are further along in the process and need professional deal materials, our CIM Builder can help you create an investor-ready Confidential Information Memorandum in minutes.