You will hear the phrase the moment you think about selling. “What multiple will I get?” It sounds technical. The idea underneath is simple, and it controls a huge part of your price.
Start with the two words
EBITDA is just a measure of profit, roughly the cash the business throws off before interest, taxes, and accounting items that are not real cash. Think of it as the engine’s true horsepower.
A multiple is how many times that profit a buyer will pay. If your EBITDA is one million dollars and the multiple is five, the business is worth about five million. Simple.
Why the multiple is the whole game
Here is the part owners miss. Growing profit by a little is good. But raising the multiple changes everything you already earn. Move from a multiple of four to a multiple of six, and you have added 50% to your price without earning a single extra dollar of profit.
One business owner spent a year chasing more revenue and barely moved his number. The next year he focused on the things that lift the multiple: recurring revenue, less dependence on him, cleaner financials. His profit grew only modestly, but his multiple jumped, and his value rose far more than the year before.
What raises your multiple
- Predictable, recurring revenue.
- Low dependence on the owner.
- Diversified, sticky customers.
- Strong, steady margins and a clean growth story.
- Good documentation and a capable team.
Notice these are the same things that reduce a buyer’s risk. That is the secret. The multiple is really a measure of how safe your profit looks. Make it safer, and the multiple climbs.
Talk it through
Want to know your current multiple and what would move it? The M1 Valuations team can tell you both, with the math behind it. When you are ready, we will walk you through it.