Business Valuation Multiples by Industry and Business Size
A business can be profitable and still be worth very different amounts depending on its industry, size, earnings, and market conditions. This is where business valuation multiples come into play.
A valuation multiple is a ratio used to estimate a company's value based on its earnings or, in some cases, its revenue. The multiple is applied to a measure such as Seller's Discretionary Earnings (SDE) or EBITDA and reflects what buyers have historically paid for similar businesses.
This guide explains how business valuation multiples are determined, why they vary by industry and business size, and how to use them as a starting point without treating a rule of thumb as a substitute for a professional valuation.
What Are Business Valuation Multiples
A valuation multiple is shorthand for what the market is willing to pay for a dollar of earnings in a given industry, at a given size, under given risk conditions. The formula itself is simple:
Business Value = Earnings x Multiple
The complexity lives entirely in the multiple. Two numbers feed into it: how much risk a buyer takes on by owning this business and how much growth they expect once they do.
Recurring contracts, low customer concentration, and a team that runs the place without the owner in every decision all lower risk and push the multiple up. A single owner doing all the sales, all the delivery, and all the client relationships raises risk and pulls the multiple down, even if the business is profitable.
The Three Approaches Behind Every Valuation
Multiples come out of the market approach, one of three recognized ways to value a business. Knowing all three helps explain why a multiple-based estimate is a starting point and not a final number.
1. Market Approach
This is where multiples live. An appraiser looks at what comparable businesses actually sold for, or what similar public companies trade at, then applies that ratio to the subject company's earnings. It works because it reflects real transactions instead of theory, but it depends on finding genuinely comparable deals, which gets harder the more niche or unusual a business is.
2. Income Approach
This method projects the business's future cash flow and discounts it back to today's dollars, usually through a discounted cash flow (DCF) model or a capitalization of earnings calculation. It is the most rigorous of the three, and the one courts and the IRS lean on for tax and dispute matters, but it requires defensible assumptions about growth, margins, and risk that a rule-of-thumb multiple skips entirely.
3. Asset-Based Approach
Here, value equals the fair market value of assets minus liabilities. It matters most for asset-heavy businesses, holding companies, or a business that is losing money and would be worth more sold off piece by piece than kept running. For a profitable service business, this approach usually produces the lowest of the three numbers and gets used mainly as a floor.
A professional business valuation typically blends two or three of these approaches. A quick multiple gives you a fast, defensible ballpark. It is not a substitute for the full analysis once you are close to an actual sale.
SDE vs. EBITDA
Before comparing multiples across industries, you need to know which earnings metric they're built on, because SDE multiples and EBITDA multiples are not interchangeable.
Seller's Discretionary Earnings (SDE) adds the owner's full salary, benefits, and personal expenses run through the business back into net profit. It answers a specific question: how much does this business put in one owner-operator's pocket in a year? SDE is the standard for businesses under roughly $1 million to $2 million in earnings, where the owner is doing much of the day-to-day work.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) strips out financing and accounting decisions and typically replaces owner compensation with a market-rate manager salary instead of adding it all back. It reflects standalone profitability for a business that could run under professional management, which is exactly the assumption private equity buyers and larger strategic acquirers make.
Business Valuation Multiples by Industry
The ranges below reflect typical multiples reported across business brokerage and M&A advisory data in 2026. SDE multiples generally apply to smaller, owner-operated businesses, while EBITDA multiples are more common for larger companies with established management teams.
Car washes: SDE multiples typically range from 3.5x to 5.0x, while larger deals may command 6x to 9x EBITDA.
HVAC: Smaller businesses often trade at 3.0x to 5.0x SDE, compared with 5x to 8x EBITDA for larger companies.
Plumbing: Typical SDE multiples range from 2.5x to 4.5x, with larger businesses reaching 5x to 7x EBITDA.
Electrical contracting: SDE multiples generally fall between 2.5x and 4.5x, while larger companies may trade at 4.5x to 7x EBITDA.
IT and managed service providers: Businesses may trade at 3.0x to 5.0x SDE, while larger MSPs can reach 6x to 8.5x EBITDA.
Insurance agencies: Typical SDE multiples range from 3.0x to 5.0x, with larger transactions reaching 8x to 12x EBITDA.
Dental practices: Smaller practices commonly fall around 3.0x to 4.5x SDE, while larger practices may command 7x to 11x EBITDA.
Healthcare services: Typical SDE multiples range from 2.5x to 4.0x, with larger companies trading around 5x to 9x EBITDA.
Professional services: Agencies and consultancies generally fall within 2.5x to 4.0x SDE and 4x to 7x EBITDA for larger businesses.
Manufacturing: Smaller businesses may trade at 2.5x to 4.0x SDE, while larger companies may command 5x to 7x EBITDA.
Ecommerce: Typical SDE multiples range from 2.0x to 3.5x, with larger businesses potentially reaching 4x to 6x EBITDA.
Independent retail: SDE multiples generally range from 1.5x to 3.0x, while larger transactions may fall around 3x to 5x EBITDA.
Single-unit restaurants: Typical SDE multiples are around 1.5x to 2.5x, compared with 2.5x to 4x EBITDA for larger deals.
Multi-unit restaurant franchises: These businesses are generally valued using EBITDA, with typical multiples around 5x to 7x.
Independent pharmacies: Smaller businesses commonly trade at 1.5x to 2.5x SDE, while larger deals may reach 3x to 4.5x EBITDA.
SaaS and software: These businesses are generally valued using EBITDA or other metrics rather than SDE. EBITDA multiples can range from 6x to 15x, with growth rate having a major impact on the multiple.
Small Business Valuation Multiples by Size
Industry sets the ceiling and floor. Size determines where within that range a specific business lands, and it does so predictably. Here are the multiples for small business valuation:
Main Street businesses (under $1 million in earnings). These are almost always priced on SDE, typically in the 2x to 3x range across most industries. The buyer pool is individuals, often financed through SBA loans, who plan to run the business themselves. Owner dependence is the single biggest drag on price at this tier, because the buyer is essentially buying a job along with the company.
Lower-middle-market businesses ($1 million to $5 million in earnings). This is the transition zone. Some deals still price on SDE at the higher end, 3x to 4.5x, while others start pricing on EBITDA once a management layer exists below the owner. Private equity search funds and independent sponsors become active buyers here, and multiples climb accordingly.
Established mid-market businesses (above $5 million in EBITDA). EBITDA multiples take over completely, typically 5x to 9x depending on industry, with recurring-revenue sectors like software, insurance, and healthcare platforms reaching well above that. Buyers at this tier are institutional: private equity firms, strategic acquirers, and industry consolidators with dedicated deal teams.
Why a Professional Valuation Beats a Rule of Thumb
Business valuation multiples are useful starting points, but they cannot account for the factors that make your business different, such as customer concentration, growth trends, owner dependence, margins, or recent investments. Two businesses with identical SDE can have significantly different values once these details are considered. At Aria Business Advisors, our advisors help business owners position their companies, attract qualified buyers, and negotiate terms based on the business's actual strengths rather than a generic industry multiple. If you're considering a sale within the next year or two, a professional valuation can give you a more realistic picture of what your business may be worth before you go to market.
Conclusion
Business valuation multiples provide useful benchmarks, but they cannot capture every factor that influences a company's value. SDE, EBITDA, and revenue multiples can help establish a starting point, while a professional valuation considers the business's specific strengths, risks, financial performance, and market position. If you're preparing for a sale or want a clearer picture of your company's current value, an experienced valuation advisor can help you move beyond industry benchmarks and arrive at a more defensible estimate.
