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    What's a good EBITDA multiple? A guide to valuing your business in 2026

    For many business owners, understanding their company's true value is a critical step, whether planning for an eventual exit, securing financing, or simply assessing performance.

    By James CrawfordUpdated 6 Mar 20263 min readAI-Enhanced

    AI Explanation

    A concise explanation of the article's key points.

    Why this matters

    Two weeks ago I had to tell a founder his ebitda multiple for business valuation was not 7x but closer to 5.8x. He had anchored to an industry table. The buyer anchored to churn, short contracts, and one customer at 31% of revenue.

    Here is the thing: a good multiple is not a number you find online. It is a range you can defend with evidence. If you want a usable ebitda multiple for business valuation, start with risk, not averages.

    What a good EBITDA multiple actually measures

    Most advisors will disagree with me, but a good multiple is a price for risk, not a reward for effort. Buyers pay more for cash flow they believe will repeat. If your cash flow is fragile, the multiple drops even when the sector looks strong.

    When I answer what is a good multiple, I start with the risk story and work backward. That is the only way an ebitda multiple for business valuation survives diligence.

    • Durable cash flow over the last 24 months
    • Visibility of revenue through contracts
    • Management depth beyond the founder

    Why 2026 multiples feel tighter

    Customer concentration

    30%+ from one client
    Often compresses the multiple by a full turn.

    Recurring revenue

    60%+ contracted
    Supports higher multiples with less retrading.

    Owner dependency

    Founder closes most sales
    Reduces the multiple when the business cannot run without you.

    Normalize EBITDA before you argue about the multiple

    EBITDA multiple vs EV/EBITDA vs revenue

    01

    EBITDA multiples

    Best for stable margins and visible cash flow. Buyers can defend the earnings base.

    02

    EV/EBITDA multiples

    Useful for comparing businesses with different debt levels, but only if EBITDA is clean.

    03

    Revenue multiples

    Works for SaaS with strong retention and gross margins. Weak retention makes the multiple unreliable.

    Case: Northfield and the 5.8x outcome

    Northfield Manufacturing had GBP 2.3M in revenue and GBP 340K EBITDA. The owner wanted a 7x multiple because peers were trading higher. The problem was customer concentration: 35% of revenue came from one client. We spent 14 months reducing the dependency and extending contracts.

    The deal closed at 5.8x EBITDA. The ebitda multiple for business valuation moved up because the risk moved down, not because the market was generous.

    • Reduced the top customer from 35% to 22% of revenue
    • Added a second sales lead to reduce founder dependency
    • Converted two major accounts to multi-year contracts

    How I build a defendable multiple range

    1. 01

      Step 1: normalize EBITDA

      Create a clean run-rate with documented add-backs so the base is defensible.
    2. 02

      Step 2: set the comp range

      Use recent deals that match size, margins, and customer concentration.
    3. 03

      Step 3: adjust for risk

      Move the multiple up or down based on churn, contract length, and management depth.
    4. 04

      Step 4: sanity check with DCF

      Run a basic DCF to confirm the multiple range aligns with cash flow reality.

    Multiple is only half the price

    I have seen owners win a higher multiple and still take home less because the structure was weak. Net debt, working capital pegs, and earn-outs can erase a full turn.

    Most advisors will disagree, but I would rather accept a lower ebitda multiple for business valuation with clean cash at close than chase a headline price I cannot control.

    Key takeaways

    1. 01

      A good ebitda multiple for business valuation is a defendable range, not a fixed number.

    2. 02

      Multiples move with risk, not with market headlines.

    3. 03

      Clean, normalized EBITDA protects your multiple in diligence.

    4. 04

      Comps only help when size, margins, and risk profile match.

    5. 05

      Structure (net debt, working capital, earn-outs) can erase a turn of multiple.

    6. 06

      You can lift your multiple 6-12 months ahead by reducing key risks.

    Conclusion

    A good ebitda multiple for business valuation in 2026 is the one you can defend with evidence. If you want it to improve, reduce concentration, build management depth, and normalize earnings well before you go to market.

    Do that and the multiple becomes a consequence of preparation, not a guess you hope a buyer accepts. If you want a baseline fast, start with a business valuation from Valuefy and stress-test the assumptions.

    Frequently asked questions

    What is a good EBITDA multiple for a small business?
    There is no universal number. A good ebitda multiple for business valuation depends on your risk profile and can only be defended with data and comps.
    Why did my multiple drop during diligence?
    Because the buyer found risk that was not priced in. Weak add-backs, customer concentration, or short contracts often lead to a lower multiple.
    Can I use EBITDA multiples by industry as a shortcut?
    Only as a starting point. Industry averages are guardrails, but you must adjust for size, margins, and risk.
    How can I improve my ebitda multiple for business valuation quickly?
    Focus on renewals, diversify top customers, and remove founder dependency. Those moves reduce risk fast.

    Start here

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    Filed under

    ebitda valuationcompany valuation multiplesbusiness worthselling a businessexit strategy

    Written by

    James Crawford

    James Crawford

    M&A Advisor & Former Investment Banker

    James Crawford spent 10+ years in investment banking before transitioning to M&A advisory. He now helps SME owners understand their business value and prepare for successful exits. Based in London, he works with companies across Europe and brings a practical, no-nonsense approach to valuation and deal-making.

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