A good EBITDA multiple for an acquisition of a private company usually falls between 3x and 7x, with smaller owner-operated businesses clustering at the low end and larger companies with recurring revenue reaching 10x or higher. The multiple isn’t pulled from a table. It’s negotiated against the specific risk, size, and growth profile of the business, and two companies in the same industry can trade several turns apart based on how their earnings actually behave.
Size Drives the Multiple More Than Anything Else
Before industry benchmarks, look at the size of the earnings stream. Businesses with less than roughly $1 million in EBITDA are often not valued on an EBITDA multiple at all. Buyers and brokers use Seller’s Discretionary Earnings instead, which adds the owner’s total compensation back into profit. SDE multiples for these smaller businesses usually land between 1.5x and 3.5x.
Once a company crosses into the $1 million to $5 million EBITDA range, institutional buyers enter the picture and multiples jump to 4x to 7x. Above $5 million in EBITDA, private equity and strategic acquirers expand the buyer pool and 6x to 10x becomes realistic. The reasoning is practical. Larger businesses depend less on any single person, carry more diversified revenue, and can absorb management turnover without collapsing. Every step up in earnings makes the cash flow look safer, and buyers pay for that safety.
Industry Ranges in the Private Market
Public-company multiples set a ceiling, not a target. The private-market discount runs 30% to 50% or more because private shares aren’t liquid, audited, or diversified the way public shares are. Professor Aswath Damodaran’s January 2026 data, widely referenced for public benchmarks, shows systems and application software at a median EV/EBITDA of 24.48x and general retail at 17.38x. A private seller in either sector will land far below those figures.
Technology and Software
Private SaaS businesses command premium valuations within the private market, with reported medians around 12x to 22x depending on data source and size bracket. High gross margins, low marginal costs, and predictable subscription revenue that compounds without proportional headcount growth are what drive the premium.
Manufacturing and Industrial
Manufacturing operates on thinner margins and demands heavy capital investment, which pulls multiples down. Owner-operated shops with revenue under $10 million typically trade at 3.5x to 6x EBITDA, with the median around 5.4x. Larger manufacturers above $10 million in revenue, with diversified customer bases, can push toward 8x or 9x when a strategic buyer sees integration value.
Retail and Consumer Services
Single-location or regional retail operations typically change hands between 3x and 5x EBITDA. Well-known franchise concepts and high-growth e-commerce brands stretch to 6x or 7x. The gap between public retail multiples and private ones is one of the widest in any sector, so public comps are especially misleading here.
Healthcare Services
Median healthcare services EV/EBITDA multiples ran around 11.5x as of 2025, with wide variation by specialty. Multi-site physician practice platforms have traded at 10x to 12x, while single-site or small practices sell closer to 5x to 8x. Behavioral health and dental support organizations have drawn especially strong buyer interest, pushing platform multiples into the 9x to 13x range.
Professional Services
Accounting firms, consulting practices, law firms, and similar professional service businesses dependent on a few key people typically close between 3x and 5x EBITDA. Firms where the founder holds the primary client relationships often sit at the bottom of that range. The transferability of client relationships is the single most important valuation driver in this sector.
What Pushes the Multiple Up or Down
Revenue Quality
A dollar of contractually recurring revenue with automatic renewals is worth considerably more than a dollar of project-based or one-time work. Businesses with net revenue retention above 110% to 120%, meaning existing customers spend more each year than the prior year, command premium multiples because the buyer inherits a base that grows on its own. Companies with high churn and no contractual revenue face steep discounts because the buyer is effectively re-earning the revenue stream each year.
Customer Concentration
When one or two customers account for a significant share of revenue, buyers see fragility. The standard concern threshold starts around 25% to 35% of revenue from a single client. At that level, buyers often reduce the price by up to 10%. At 50% concentration or more, discounts of 25% to 35% are common, or the deal gets restructured with earnouts tied to customer retention. This is one of the fastest ways to lose value in a sale, and it’s often discovered too late to fix.
Growth Trajectory
Buyers pay for momentum. A business showing consistent double-digit revenue growth trades at a higher multiple than a flat competitor in the same industry because the buyer captures future value baked into the trend. A business that peaked two years ago and has been shrinking will trade below industry averages regardless of how good the current EBITDA looks on paper.
Management Depth
A business that runs without the owner in the building every day is worth materially more than one where the owner holds every client relationship and makes every operational decision. Buyers call this key-person risk, and it compresses the multiple directly. Building a management team that can operate independently is one of the highest-return investments a seller can make in the two to three years before a planned exit.
Buyer Type and Rate Environment
Strategic acquirers in the same or adjacent industry consistently pay more than financial buyers like private equity firms. Academic research across multiple studies shows strategic buyers paying roughly 6% to 12% more than financial buyers in competitive auction processes, driven by the cost savings and revenue opportunities a combined business can realize. Interest rates matter too. When borrowing costs rise, leveraged buyers offer lower multiples because their financing is more expensive. The reverse explains why acquisition multiples expanded so dramatically between 2010 and 2021.
Preparing the Numbers That Support the Multiple
Buyers want two to three years of detailed financial history before they commit to a multiple. They examine tax returns, income statements, and balance sheets to verify that the reported earnings are real and repeatable. Inconsistent or sloppy bookkeeping is one of the most common reasons deals fall apart or close at a lower price than expected.
Calculating Adjusted EBITDA means identifying add-backs, expenses specific to the current owner that won’t continue after the sale. Personal vehicle costs run through the business, above-market rent paid to a related party, one-time legal fees, or a family member’s salary for a no-show role are all candidates. Each legitimate add-back increases EBITDA and, multiplied by the negotiated multiple, can lift the purchase price by tens of thousands of dollars. Buyers scrutinize add-backs aggressively, though. Claiming an expense is discretionary when it’s actually operational damages credibility and the whole negotiation.
A Quality of Earnings report has become nearly standard in deals above $2 million to $3 million in enterprise value. Prepared by an independent accounting firm, it tests whether stated earnings are sustainable and whether add-backs hold up. These reports typically cost $25,000 to $35,000 for businesses under $10 million in revenue, and $60,000 or more for larger companies. Sellers who commission their own QoE before going to market often recover the cost by preventing late-stage price reductions from buyer-side due diligence surprises.
From Multiple to Cash at Closing
The headline math is simple. Adjusted EBITDA times the agreed multiple equals Enterprise Value. A company with $2 million in adjusted EBITDA and a 5.5x multiple has an Enterprise Value of $11 million. The cash the seller walks away with is almost always a different number, and that gap is where most sellers get surprised.
Cash-Free, Debt-Free
Most deals close on a cash-free, debt-free basis. The buyer receives the business without its existing debt, and the seller keeps excess cash. Outstanding bank loans, equipment financing, and lines of credit get paid off from the seller’s proceeds at closing. If the business carries $1.5 million in debt against that $11 million Enterprise Value, gross proceeds drop to $9.5 million before any other adjustments.
The Working Capital Peg
Buyers need enough short-term liquidity on day one to pay suppliers, cover payroll, and operate normally. The working capital peg is a baseline amount of net working capital, current assets minus current liabilities, that both sides agree the business should have at closing. The standard approach uses a trailing twelve-month average, though shorter periods of six or three months get used when recent trends better reflect current operating needs.
If actual working capital at closing falls below the peg, the price drops dollar-for-dollar. If it comes in above, the seller receives the excess. These adjustments often aren’t finalized until 60 to 90 days after closing, through a post-close true-up. Sellers who drain working capital in the months before closing to pull out cash will see that reduction come straight out of their proceeds.
Earnouts
When buyer and seller can’t agree on price because they see the future differently, earnouts bridge the gap. An earnout ties part of the price to post-closing performance measured by revenue or EBITDA milestones. Earnout periods of one to three years are most common, and the earnout portion frequently represents 15% to 30% of total deal consideration. Earnouts solve a real problem and create new ones. The seller gives up control while compensation remains tied to performance, and disputes over how the buyer runs the business post-closing are common. If an earnout is on the table, the operating covenants during the earnout period matter as much as the financial targets.
Taxes on the Proceeds
For 2026, the federal long-term capital gains rate is 0%, 15%, or 20% depending on taxable income. Most business sellers land in the 15% or 20% bracket. Sellers with modified adjusted gross income above $200,000 (single) or $250,000 (married filing jointly) owe an additional 3.8% Net Investment Income Tax on the lesser of net investment income or the amount over the threshold. That pushes the effective federal rate on a large sale to as high as 23.8% on the capital gains portion, before state income tax. How the price is allocated across asset categories, and whether the deal is structured as an asset or stock sale, changes the final tax bill significantly and is worth working through with a tax advisor before signing an LOI.
Transaction Costs
Business broker commissions are the largest variable cost, typically 5% to 10% for deals under $1 million in enterprise value. Rates drop on a tiered basis for larger deals, often on a Lehman or Double Lehman scale where the rate on each incremental million decreases. On a $10 million deal, the blended commission might land between 2% and 4%. Many brokers also impose minimum success fees in the $50,000 to $150,000 range. Legal fees for the seller typically run $15,000 to $50,000 depending on complexity. Escrow holdbacks of 5% to 15% of the price, held for 12 to 24 months against indemnification claims, don’t reduce the price permanently but delay when the funds arrive. A seller expecting $5 million in cash at closing on a $6 million deal, after debt payoff, working capital adjustments, broker fees, legal costs, and escrow, isn’t being pessimistic. That math is routine.