EBITDA multiples are the starting point for valuation — but what determines where on the range your business sits? Here's how buyers think about pricing small business acquisitions.
The most common question we hear from business owners is: 'What is my business worth?' The honest answer is: it depends — and what it depends on is something you have more control over than you might think.
The standard valuation methodology for small businesses is an EBITDA multiple. You take your normalised EBITDA (earnings before interest, tax, depreciation, and amortisation) and multiply it by a number that reflects the quality, risk, and growth prospects of the business.
For businesses under £5M revenue, that multiple typically ranges from 3x to 8x EBITDA for trade sales, with financial sponsors (PE firms) occasionally paying at the top end for particularly high-quality businesses. The median is usually around 4–5x.
What pushes you toward the top of the range:
Recurring revenue — Subscription contracts, retainers, and long-term agreements are worth more than project-based or transactional income. A buyer paying 7x would expect most revenue to be recurring and retained.
Strong growth trajectory — A business growing at 20%+ per year commands a premium. Buyers are paying for future earnings, not just current ones.
Low customer concentration — If no single customer represents more than 10–15% of revenue, the business carries lower commercial risk.
Management depth — A business that can run without the founder is fundamentally worth more than one that can't.
Sector tailwinds — A business in a sector with structural growth (healthcare services, technology-enabled services, compliance) will attract more buyers and command higher prices.
What pushes you toward the bottom of the range:
Key person dependency, customer concentration, declining margins, messy financials, or operating in a structurally declining sector. These are all things that can be improved with sufficient preparation time.
The practical implication: improving your multiple from 4x to 5x on £500K EBITDA is worth £500K on your sale proceeds. That's why preparation isn't a cost — it's an investment.
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