Valuation multiple

The number a business's earnings are multiplied by to reach a price. Owner-operated businesses commonly trade in a rough range of 1.5x to 3.5x SDE, with risk factors deciding where in the range.

A multiple compresses everything about a business's risk and quality into one number: price = earnings x multiple. For main-street businesses the earnings measure is usually SDE and commonly quoted multiples sit roughly between 1.5x and 3.5x, varying by industry and, more than anything, by risk.

What moves a specific business inside the range is a short list: owner dependence, provable books, recurring revenue share, transferability of the setup, and customer concentration. Each is workable years before a sale, which is why the multiple is better understood as a score you build than a number you are given.

An online multiple is an estimate, not an appraisal: a real price needs a real buyer. Our valuation guide walks the whole arithmetic.