Is 3-5x EBITDA a 'typical' valuation for a small business?

by a searcher from Universität Mannheim

7 months ago

In the 'HBR Guide to Buying a Small Business', Ruback and Yudkoff suggest businesses with $0.8-2.0M EBITDA often sell for 3-5x EBITDA.
I'm curious:
Is this 3-5x multiple realistic, especially in the German market?
For smaller businesses ($0.4-0.8M EBITDA), what's a typical EBITDA multiple?

Keen to hear your thoughts and experiences!
Thanks!

7 likes
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34 comments

professional from Texas Tech University - Rawls College of Business Administration

Meh - too generic IMO. It might be at the averages, but you would think more goes into this then a range of multiples.

1 day ago | like reply | 0 likes

investor from Northwestern University - Kellogg School of Management

Seconding that it really depends on the industry. I submitted a bid on a fascinating niche aerospace manufacturing business - $1.8 mil top line / $1.0 mil EBITDA with 3 employees and very asset light. I bid ~4.5x and I believe the winning bidder was ~6.0x. More than I would be willing to pay, but the right business, however small, can command a full valuation.

4 days ago | like reply | 0 likes

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