Ask what a business sold for and you will often hear a multiple: "it went for five times". That shorthand hides most of what matters. The multiple is a buyer's verdict on risk, and unlike your profit, it is something you can change in a couple of years without selling a single extra unit.
What an EBITDA multiple is
An EBITDA multiple is the enterprise value of a business divided by its EBITDA, its profit before interest, tax, depreciation and amortisation. If a business earns £500,000 of adjusted EBITDA and a buyer pays £2,500,000 for it on a cash-free, debt-free basis, the multiple is five.
The multiple applies to adjusted EBITDA, the profit after the buyer has accepted or rejected your add-backs. Our guide to add-backs explains that step.
Why smaller businesses sell for lower multiples
The Dealsuite M&A Monitor for August 2025 reported an average of 5.3 times EBITDA across UK and Irish deals, and around 3.1 times for businesses with £200,000 of profit. The pattern is consistent: the smaller the profit, the lower the multiple. Three reasons explain most of it.
- Fewer buyers. Private equity and larger trade buyers often have a minimum size. Fewer bidders means less competition on price.
- More fragile profit. A smaller business is more likely to depend on its owner, a few customers or a few people.
- Thinner records. Year-end accounts and little else make it harder for a buyer to trust the figures, so they protect themselves with price or terms.
Treat any published average as a reference point, not a price. Deal data is drawn from the deals that happened to be reported, and averages hide a wide spread within every size band.
The seven levers that move your multiple
Within your size band, the multiple moves with how a buyer answers seven questions. They are the same levers the Harvest valuation calculator asks you to score.
1. Revenue quality
Is revenue recurring, contracted or repeat, or does it start from zero each year? Contracted and repeat revenue is easier to forecast, so it is worth more.
2. Customer spread
What share of revenue comes from your largest customer and your top three? Heavy concentration means the profit could leave in one phone call, and buyers price that in, often through an earn-out.
3. Growth trend
Is profit growing, flat or falling, and can you explain why with evidence? A buyer pays for the future. An explained, consistent trend is worth more than a single good year.
4. Margin direction
Are margins stable or improving, and do you understand what drives them? Falling margins with no explanation suggest a problem the buyer will inherit.
5. Niche position
Do you lead a defined market, or compete on price in a crowded one? Specialists are harder to copy and usually command better margins and multiples.
6. Owner independence
Could the business run for six weeks without you? If you hold every key relationship and decision, the buyer is buying a job, not a business. This is often the biggest single discount on a small business, and one of the most fixable.
7. Financial credibility
Do you have monthly management accounts, three clean years and documented adjustments? Credible numbers shorten due diligence and remove the buyer's reasons to chip the price late in the deal.
What a turn of multiple is worth
An illustration, not a forecast. Take a business with £400,000 of adjusted EBITDA:
- At 3.5 times, its enterprise value is £1,400,000.
- At 5 times, it is £2,000,000.
Same profit, £600,000 apart. Moving the multiple is usually faster than growing profit by the same amount, because much of it is evidence and structure: contracts, a second line of management, monthly reporting, a documented add-back register.
The headline multiple is not the price
A multiple on an offer letter assumes the money arrives. Part of a deal is often deferred or depends on future performance through an earn-out. Money paid in two years is worth less than money paid today, and earn-out money may never be paid. Compare offers on what they are worth today, not on the headline. The calculator's offer comparison does this for two offers side by side.
Where to start
Score yourself honestly on the seven levers in the valuation calculator. It shows your two weakest, with the first action for each. Then read how a buyer builds a price to see where the multiple sits in the whole picture.
General information to help you prepare, not tax, legal or financial advice. Rates and rules change; check the current position and take advice on your own circumstances.
