EBITDA Multiples by Industry

Start with the industry ranges in the tables above. Then adjust for your specific situation. Recurring revenue, low customer concentration, strong management depth, above-average growth, and defensible market position all push multiples up. Owner dependence, customer concentration, cyclicality, and working capital intensity push them down. A $5M EBITDA software company with 90% recurring revenue and 25% growth could trade at 15x. The same $5M EBITDA from a project-based IT services firm with no recurring contracts might trade at 6x. The range is real.

Size is the single most predictable driver of EBITDA multiples. A $20M EBITDA business typically commands a 30-60% higher multiple than a $3M EBITDA business in the same industry. GF Data reports that businesses with $10M-$25M in EBITDA trade at a 1.5x-2.0x premium over businesses with $3-$5M in EBITDA across all sectors. The premium reflects lower risk, deeper management teams, greater liquidity, and the ability to support institutional debt financing. The size premium table above shows typical ranges by EBITDA band.

Directly and measurably. Mercer Capital analysis shows that a 250 basis point increase in the federal funds rate results in approximately a 25% decrease in EBITDA multiples for debt-free businesses, holding all else constant. For leveraged PE transactions (typical 60-80% equity, 20-40% debt), the impact is even larger: the same rate increase can compress multiples by more than a third. Interest rates at the current 4.5-5.5% range have permanently reset valuations relative to the near-zero-rate era of 2020-2021. The era of multiple expansion driving PE returns is over.

The Rule of 40 states that a healthy SaaS company should have a combined growth rate and EBITDA margin that equals or exceeds 40%. For example, 30% growth + 10% margin = 40. Or 15% growth + 25% margin = 40. Companies above the Rule of 40 threshold consistently trade at premium multiples. Below it, multiples compress rapidly. The rule captures the tradeoff between growth and profitability: a company can grow fast with thin margins or grow slowly with fat margins, and both can be equally valuable.

Research across multiple data sources shows recurring revenue adds a 15-60% premium to EBITDA multiples, depending on the industry. In B2B SaaS, the premium can exceed 60%: a company with recurring revenue and high growth trades at 8.0x vs. 5.0x for non-recurring revenue (First Page Sage small business data). In IT managed services, the premium is approximately 26%. In manufacturing, it is roughly 26%. The key is not just having recurring revenue but having high-quality recurring revenue: long contract terms, high retention rates, and predictable renewal economics.

Customer concentration is the most common multiple compressor in the middle market. The threshold is 10-15% of revenue from any single customer. Below that, concentration is not a pricing factor. Above 20-25% from a single customer, expect a 0.5x-1.0x reduction in your EBITDA multiple. Above 40-50% from your top three customers, the discount can reach 1.0x-2.0x. In some cases, buyers restructure the deal with earnouts tied to key customer retention rather than reducing the headline multiple. Diversification takes years, so start early if you are planning a sale.

Public company EBITDA multiples are systematically 30-50% higher than private company multiples for comparable businesses. Damodaran (NYU Stern) data for January 2026 shows public market averages of 19.7x across all sectors, compared to the 7.2x average GF Data reports for PE-sponsored middle market transactions. The gap reflects three factors: liquidity premium (public shares can be sold daily), transparency premium (quarterly reporting, audited financials), and scale premium (public companies are typically larger). Never use public company multiples to value a private business without applying a meaningful discount.

Common adjustments include owner compensation above market rate (replacing the owner salary with a market-rate executive salary), one-time expenses (litigation, relocation, non-recurring consulting fees), personal expenses run through the business (vehicles, travel, family member salaries for non-working family), below-market rent on owner-held real estate, and revenue or cost items that are genuinely non-recurring. These adjustments are called "add-backs" and they are where most valuation negotiation happens. A quality of earnings report from an independent accounting firm validates these adjustments and gives buyers confidence in your numbers.

In PE, a "platform" acquisition is the initial company purchased to serve as the foundation for a roll-up strategy. An "add-on" (or bolt-on) is a smaller company acquired and merged into the platform. GF Data shows that in H1 2025, both platforms and add-ons averaged 7.2x, though historically platforms trade at 0.5x-1.5x premiums. Add-ons now comprise 75%+ of total PE deal activity. The key insight: if you are a smaller company being acquired as an add-on, your multiple is influenced by the platform buyer's blended cost of capital and the strategic value you bring (geography, customer base, capability) rather than standalone market multiples.

Three structural factors. First, high gross margins: software companies typically operate at 70-85% gross margins vs. 30-50% for most other industries. Each dollar of revenue generates more cash flow. Second, recurring revenue: SaaS models with annual or monthly subscriptions provide predictable, compounding cash flows that reduce buyer risk. Third, scalability: adding the next customer costs almost nothing in variable cost, which means growth produces disproportionate EBITDA expansion. A software company growing 30% can increase EBITDA by 50%+ if operating leverage kicks in. Buyers are paying for that compounding potential.

Consensus from Bain, McKinsey, Lincoln International, and GF Data is that multiples will remain flat in 2026. GF Data shows the average PE-sponsored middle market deal at 7.2x-7.5x, stable since mid-2024. Bain reports that 79% of PE respondents expect multiples to stay flat, 14% anticipate increases, and 7% expect declines. The era of multiple expansion as a return driver is over. Bain frames it as "12 is the new 5": PE deals now require 10-12% annual EBITDA growth to generate returns that 5% growth delivered when leverage was cheap and multiples were expanding.

Off-market acquisitions, where the buyer engages the seller directly without an intermediary-led auction, close at 15-30% lower multiples than competitive processes. Bain reports this consistently across deal sizes and industries. Sutton Place Strategies data shows businesses sold through broad auction processes receive 18-25% higher prices than bilateral negotiations. If you are a buyer, proprietary sourcing means better entry valuations. If you are a seller, running a competitive process with a qualified sell-side advisor captures 15-30% more of your business's value. That gap alone typically exceeds the advisory fee multiple times over.

Start with net income. Add back interest expense, income taxes, depreciation, and amortization. Then adjust for non-recurring items: one-time legal fees, the owner's above-market salary, personal expenses run through the business, non-recurring revenue, and any other items that do not represent the ongoing earning power of the business. These adjustments are called "add-backs." A quality of earnings report from an independent accounting firm validates these adjustments and gives buyers confidence in your numbers. The most contentious adjustments are typically owner compensation (what is the fair market replacement salary?) and pro forma cost savings (what costs will the buyer not incur?).

It depends heavily on the specialty and practice size. Behavioral health and ABA therapy: 8x-14x. Veterinary: 8x-14x (solo-doctor as low as 3.5x). Dental/DSO: 5x-12x (small group 5x-7x, platform DSO 8x-12x). Dermatology: 8x-12x. Ophthalmology: 8x-11x. Urgent care: 7x-10x. Physical therapy: 6x-9x. Home health: 6x-9x. The biggest factor beyond specialty is payor mix: practices with high commercial insurance percentages trade at the top of the range, while Medicare/Medicaid-dependent practices trade at the bottom. Practice size matters enormously too, with platforms above $5M EBITDA commanding 2-4x higher multiples than solo practices.

EV/EBITDA compares enterprise value to earnings before interest, taxes, depreciation, and amortization. It is the standard valuation metric for profitable businesses because it normalizes for capital structure and approximates cash flow. EV/Revenue compares enterprise value to total revenue, ignoring profitability entirely. Revenue multiples are used primarily for high-growth, pre-profit companies (early-stage SaaS, biotech) where EBITDA is negative or meaningless. For profitable middle-market businesses, EV/EBITDA is the standard. If a buyer is quoting you a revenue multiple instead of an EBITDA multiple, they are either comparing you to early-stage companies or trying to obscure a low earnings multiple.

Within the US, geographic variation is modest: 0.5x-1.0x for comparable businesses. Businesses in major metro areas with larger talent pools sometimes command slight premiums due to deeper buyer pools. International variation is more significant. European transactions typically close at 0.5x-1.5x below comparable US transactions due to lower PE fund concentration and different leverage markets. Emerging market multiples are lower still, reflecting country risk, currency risk, and liquidity constraints. For home services and healthcare, geography matters more because these businesses serve local markets and their density/scale in a specific region directly affects the multiple.