Everybody wants to know what their business is worth. The answer always starts with the same question: what are the multiples in your industry?
That's the right starting point and the wrong ending point. EBITDA multiples provide a frame of reference. They tell you the general neighborhood of value for businesses with your revenue profile in your sector. They do not tell you what a specific buyer will pay for your specific business. The gap between a "market multiple" and an actual purchase price can be 2x to 3x EBITDA, which on a $5M EBITDA business represents $10M to $15M in enterprise value.
Understanding that gap is the difference between a productive sale process and a frustrating one.
What EBITDA Multiples Tell You (and What They Don't)
An EBITDA multiple is the ratio of enterprise value to EBITDA. It provides a standardized way to compare business valuations across companies and industries, but it obscures more than it reveals about any individual business.
Enterprise value divided by EBITDA. That's the formula. A business generating $3M in EBITDA that sells for $18M traded at a 6x multiple.
The metric is popular because it normalizes for capital structure (unlike price-to-earnings ratios) and approximates cash flow before reinvestment decisions. It's a shorthand that allows buyers, sellers, and advisors to communicate about value quickly.
What it doesn't tell you:
Working capital requirements. A business trading at 6x with heavy working capital needs generates less free cash flow than a 6x business with negative working capital. The multiple is the same. The economics are different.
Capital expenditure intensity. EBITDA ignores capex. A 7x multiple on a capital-light services business is not the same as 7x on a manufacturing business that spends 15% of revenue on equipment replacement. The buyer knows this even if the multiple doesn't reflect it.
Revenue quality. $5M in EBITDA from recurring subscription revenue is categorically different from $5M in EBITDA from project-based work with no contractual backlog. Both businesses might trade in the same multiple range on paper, but the buyer's confidence in future cash flows (and therefore their willingness to pay) is fundamentally different.
The multiple is a starting point for conversation. Not a destination.
Current EBITDA Multiples by Industry
Middle market EBITDA multiples range from 4x in cyclical industries to 20x for high-growth software companies. The table below reflects current transaction data from public and proprietary sources.
The following ranges represent typical transaction multiples for private company acquisitions in the US middle market ($10M to $250M enterprise value) as of early 2026. Data is compiled from GF Data (private transaction database tracking middle market deals), Bain & Company's Global M&A Reports, public filings, and industry-specific reports.
| Industry | Typical Multiple Range | Trend (vs. 2024) | Key Drivers | |----------|----------------------|-------------------|-------------| | Software (recurring revenue) | 12x - 20x | Stable to down | Net revenue retention, growth rate, Rule of 40 | | Healthcare Services | 8x - 14x | Stable | Payor mix, regulatory moat, same-store growth | | Financial Services | 8x - 14x | Up slightly | AUM growth, fee predictability, regulatory compliance | | Insurance Distribution | 8x - 12x | Stable | Organic growth rate, retention ratio, carrier relationships | | Business Services | 6x - 10x | Stable | Contract duration, customer diversification, margin profile | | Food & Beverage | 6x - 10x | Down slightly | Brand strength, distribution channels, commodity exposure | | Education & Training | 6x - 10x | Stable | Enrollment trends, regulatory environment, outcome metrics | | Industrial Services | 5x - 8x | Stable | Backlog visibility, contract structure, end-market diversity | | Construction & Engineering | 4x - 7x | Down slightly | Backlog duration, bonding capacity, geographic concentration | | Energy Services | 4x - 7x | Volatile | Commodity price sensitivity, contract vs. spot revenue, ESG considerations |
A few notes on reading this table.
Wide ranges are intentional. A healthcare services business growing at 20% with diversified payors trades at 14x. A flat-revenue home health agency with Medicare concentration trades at 8x. Same industry. Different businesses. The range captures that reality.
Size matters. Within any industry, larger businesses (measured by EBITDA) command higher multiples. GF Data reports that businesses with $10M to $25M in EBITDA traded at an average premium of 1.5x over businesses with $3M to $5M in EBITDA across all sectors (GF Data, Platform vs. Bolt-On Transaction Multiples, 2025). Bigger businesses are less risky, more liquid, and attract more buyer interest.
Private vs. public. Public company multiples are systematically higher than private company multiples due to liquidity, transparency, and scale premiums. Don't use public company multiples to value a private business. The discount for illiquidity and size ranges from 20% to 40% (Aswath Damodaran, "Valuation: Measuring and Managing the Value of Companies," 2025).
Point-in-time data. Multiples shift with market conditions, interest rates, and capital availability. The ranges above reflect a market environment with stabilizing interest rates and active (but selective) PE dealmaking. A recession would compress these ranges by 1x to 2x across the board.
What Drives Multiples Up
Five factors consistently push EBITDA multiples above industry medians: recurring revenue, low customer concentration, strong management depth, above-average growth, and defensible market position.
Recurring Revenue
Nothing drives multiples like predictable cash flow. A business with 80% recurring revenue (subscriptions, long-term contracts, retainers) trades at a meaningful premium to a business with 80% project-based or transactional revenue. In software, the gap between a company with 95% net revenue retention and one with 85% retention can be 5x or more in valuation multiple.
The mechanism is simple. Recurring revenue reduces risk. A buyer can model future cash flows with higher confidence when the starting point is a contracted revenue base rather than a sales forecast.
Low Customer Concentration
The magic number is 10%. If no single customer represents more than 10% of revenue, the business has meaningful diversification. Every increment of concentration above that threshold compresses the multiple.
A business with 40% of revenue from one customer isn't really a $5M EBITDA business from the buyer's perspective. It's a $3M EBITDA business (the diversified portion) plus a $2M revenue stream that could disappear at contract renewal. The buyer prices accordingly.
Management Depth
Buyers pay more for businesses that don't depend on the owner. This is particularly true for PE buyers, who need the business to operate through a 5 to 7 year hold period during which the original owner will likely depart.
A business with a capable CEO, CFO, and VP of operations who can run day-to-day without the owner commands 0.5x to 1.5x in additional multiple over an otherwise identical owner-dependent business. It's the single most controllable factor in valuation.
Growth Rate
A business growing EBITDA at 15% annually trades at a fundamentally different multiple than one growing at 3%. The premium for growth reflects the buyer's calculation that today's EBITDA understates the future earnings power of the business.
In the middle market, the growth premium is roughly 0.5x of additional multiple for every 5 percentage points of EBITDA growth above the industry median (First Page Sage, EBITDA Multiples by Industry Report, 2025). A business growing at 20% in an industry where the median is 5% might command 1.5x to 2.0x above the industry median multiple.
Market Position
Market leaders trade at premiums. A company with the #1 or #2 position in a niche market has pricing power, customer stickiness, and competitive moats that translate directly to higher multiples. The premium is difficult to quantify precisely because "market position" is subjective, but in practice it ranges from 0.5x to 2.0x above the industry median.
What Compresses Multiples
Owner dependence, customer concentration, cyclicality, regulatory risk, and working capital intensity are the five factors that most reliably push multiples below industry medians.
Owner Dependence
If the business can't function without the owner for 6 months, most buyers will discount the multiple by 1x to 2x. They're buying a job, not a business. PE firms in particular won't pay a premium for a business where the value walks out the door with the seller.
The test is simple: if the owner took a 6-month sabbatical, would revenue decline by more than 10%? If yes, the business has an owner dependence problem. Fix it before going to market.
Customer Concentration
Already covered above, but worth emphasizing: this is the most common multiple compressor in the middle market. Businesses don't sell for what they should because the owner allowed one or two customers to become an outsized percentage of revenue. Diversification takes years. Start early.
Cyclicality
Businesses tied to economic cycles (construction, energy, real estate development) trade at lower multiples because buyers discount the probability of a downturn during their hold period. If your EBITDA doubled in a boom year, the buyer isn't paying 8x of peak earnings. They're normalizing to a mid-cycle level and applying a multiple to that.
Regulatory Risk
Healthcare businesses exposed to Medicare reimbursement changes. Financial services businesses subject to evolving compliance requirements. Education companies facing regulatory scrutiny. Regulatory risk creates uncertainty in future cash flows, and uncertainty compresses multiples.
Working Capital Intensity
A business that requires $1 of working capital for every $5 of revenue needs continuous reinvestment to grow. That reinvestment comes out of the buyer's return. EBITDA doesn't capture it, but the multiple does. Working capital-intensive businesses trade 0.5x to 1.5x below capital-light businesses in the same industry.
The Proprietary Deal Premium
Off-market acquisitions trade at 15% to 30% lower multiples than auctioned transactions. For buyers, deal origination is a valuation strategy, not just a sourcing strategy.
This is the data point that should reshape how both buyers and sellers think about the transaction process.
Bain & Company's research on PE deal sourcing found that proprietary transactions (where the buyer engaged the seller directly, without an intermediary-led auction) closed at meaningfully lower multiples than competitive processes (Bain & Company, Global Private Equity Report, 2025). The discount ranged from 15% to 30% depending on deal size and industry.
Sutton Place Strategies, which tracks intermediary-led M&A transactions, reported that businesses sold through broad auction processes received purchase prices 18% to 25% higher than comparable businesses sold through negotiated bilateral transactions (Sutton Place Strategies, M&A Transaction Data, 2024).
That's the same fact from two perspectives. If you're a buyer, proprietary sourcing means better entry valuations. If you're a seller, running a competitive process with a qualified sell-side advisor means capturing more of your business's value.
For PE firms and independent sponsors, the implication is clear: investing in deal origination infrastructure isn't just about finding more deals. It's about finding deals at better prices. A 20% reduction in entry multiple on a $30M transaction is $6M in enterprise value. That's a meaningful portion of the return model.
For sellers, the implication is equally clear: if you sell your business without running a competitive process, you're leaving 15% to 30% of value on the table. That's why sell-side advisory fees pay for themselves multiple times over.
The multiples table above represents averages. Whether your business trades at the top or bottom of those ranges depends on the factors described in this article, and on whether you're selling into a competitive process or a bilateral negotiation.