Valuation multiples by industry: what actually moves them
Short answer
Valuation multiples do differ by industry, mainly because industries differ in how recurring, stable and transferable their earnings are. But for small businesses, size, owner dependence, customer concentration and the quality of the books often move the multiple more than the industry label does. Two businesses in the same industry can sell at very different multiples.
Reliable multiples come from databases of completed transactions used by credentialed appraisers, not from free tables online that mix asking prices, SDE and EBITDA. We describe the industry factors below rather than publish numbers we can't stand behind.
"What's the multiple for an HVAC company?" is one of the most common questions buyers ask, and one of the hardest to answer honestly. There is no single number. There's a range for each industry, and within it, each business lands wherever its own risks put it.
Why industry matters at all
Industries differ in how predictable earnings are and how easily they transfer to a new owner. A business where customers sign recurring contracts and staff do the work is less risky to buy than one where the owner wins every project personally. Buyers pay more for lower risk.
Factors by industry group
| Industry group | Supports a higher multiple | Pulls it down |
|---|---|---|
| Home services (HVAC, plumbing, pest control, pool) | Service agreements, recurring routes, licensed staff beyond the owner | Owner holds the licence; mostly one-off installs; tech turnover |
| Restaurants and food | Long lease, proven concept, managers in place, franchise support | Owner-chef, short lease, thin margins, high labor cost |
| Retail | Strong location, loyal customers, steady margins | Online competition, inventory risk, declining category |
| Professional practices (accounting, insurance) | Recurring clients, high retention, staff relationships | Clients tied to the selling professional |
| Healthcare practices | Diversified payers, associate providers, strong patient base | Single provider, payer concentration, reimbursement pressure |
| Software and online | Recurring revenue, low churn, growth, documented code | Platform dependence, founder-coder, churn |
| Transport and logistics | Contracts, newer fleet, good safety record | Spot-market revenue, aging fleet, driver shortage |
| Construction and trades | Backlog, bonding capacity, repeat GCs | Project lumpiness, owner relationships, WIP surprises |
| Manufacturing and distribution | Diverse customers, proprietary products, good equipment | Customer concentration, aging machines, supplier dependence |
What usually matters more than industry
- Size. Larger earnings generally command higher multiples, because they're more stable and attract more buyers.
- Owner dependence. If the business needs the seller, the earnings are partly the seller's.
- Revenue quality. Recurring and diversified beats one-off and concentrated.
- Verified earnings. Clean books that match the returns and the bank reduce risk.
- Transferability. Lease, licences, contracts and key staff that come with the business.
For more on these, see what makes a business worth more. Industry-specific factor pages: restaurants, software, accounting firms, construction, trucking, laundromats.
Worked example: two businesses in the same industry
Illustrative example, not real businesses or market multiples
Two landscaping companies each show $400,000 of SDE. Company A: 70% of revenue from renewing commercial maintenance contracts across 60 properties, two foremen who've been there eight years, the owner sells but doesn't run crews, and equipment replaced on a schedule. Company B: 70% of revenue from installs the owner bids personally, one property manager controls 40% of the maintenance work, and the trucks are ten years old. Same industry, same earnings. An appraiser using the same comparable sales would place A toward the top of the range and B toward the bottom, and a lender would size B's loan more cautiously after deducting a market wage for the owner's estimating and a real equipment budget. If someone quotes you "the landscaping multiple", ask which of these two it describes.
Questions to ask whoever quotes you a multiple
- Is it a multiple of SDE, EBITDA or revenue?
- Is it from asking prices or completed sales? How many sales, and from when?
- What size were the businesses in the sample?
- Does the price include inventory, real estate, receivables or working capital?
- How were the earnings in the sample adjusted, and by whom?
Why published multiples can mislead
Numbers that circulate online often mix asking prices with sold prices, different earnings measures (SDE, EBITDA, net income), different deal structures (seller financing, earnouts, inventory included or not) and very different business sizes. A small sample of completed sales in a broad industry can produce a wide range that says little about your deal. That's why we don't publish multiples we can't verify. Credentialed appraisers work from transaction databases, select comparable sales and adjust them, and explain their reasoning in the report. If you're quoted a multiple, ask for the source and the sample.
Where to get real numbers
If you need defensible multiples for a specific deal, a credentialed appraiser (ASA, CBA, ABV, CVA or BCA) will use transaction databases and adjust for the business. In SBA deals the lender orders this valuation anyway. Brokers who specialize in an industry can also tell you what similar businesses recently sold for, but remember whose side they're on. OKtoBuy doesn't provide appraisals; its optional Value estimate applies published multiples like these and is labelled as an estimate.
Business valuation multiples: what they mean and how they mislead
A valuation multiple is the price divided by a measure of the business's earnings or revenue: SDE, EBITDA or sales. Saying a business sold for '3x' means the price was three times that measure. Multiples let you compare deals of different sizes, but only if you know which earnings measure was used, whether those earnings were verified, and what the price included.
Two deals at the same multiple can be very different deals.
Multiples are the shorthand of business buying. Brokers, buyers and appraisers all use them. They're useful, but they compress a lot of information into one number, and the compression hides things.
Which earnings?
| Multiple of | Includes owner pay? | Typically used for |
|---|---|---|
| SDE | Yes, one owner | Owner-operated businesses |
| EBITDA | No (market manager deducted) | Larger, managed businesses |
| Revenue | n/a | Recurring-revenue businesses |
Why two "4x" deals aren't equal
Illustrative example, not real deals
Business A: $250,000 SDE, price $1,000,000 (4x), inventory included, seller keeps receivables, 10-year lease.
Business B: $250,000 SDE, price $1,000,000 (4x), plus $120,000 of inventory on top, $60,000 of add-backs that won't survive a lender's review, 2-year lease.
B's real cost is $1,120,000, its supportable SDE is about $190,000, and its location is at risk. On verified numbers B is roughly 5.9x ($1,120,000 ÷ $190,000), with more risk. Same headline multiple, very different deal.
What changes the real multiple
- What's included: inventory, receivables, cash, equipment, real estate.
- Terms: seller notes at low rates, consulting fees, non-compete payments.
- Earnings quality: unverified add-backs inflate the denominator.
- Working capital: if you must inject cash on day one, it's part of your cost.
- Immediate capex: equipment you'll replace in year one.
Before comparing any multiple, restate the deal as total cost ÷ verified earnings. Our calculator shows asking price ÷ SDE for your inputs, and the SDE calculator helps you get to verified SDE. For what moves multiples up or down, see SDE multiples.
Using a multiple safely
A multiple is a shortcut, so use it only as a cross-check after you have done the work underneath. First confirm the earnings figure from tax returns and bank statements. Then check whether the multiple was quoted on SDE or EBITDA, before or after the owner's pay, and whether it includes inventory and working capital. Finally, ask whether the business can repay the loan from the cash it produces. If those three steps don't support a price, a multiple from a table won't either.
Frequently asked questions
Why don't you list multiples by industry?
Because we couldn't find free, reliable, current public sources that separate sold from asking prices, SDE from EBITDA and small from large deals. Publishing a number we can't verify would do more harm than good. Appraisers use paid transaction databases and adjust for the specific business.
Which industries tend to command higher multiples?
Those with recurring, contracted revenue, low owner dependence and stable demand, such as some recurring-service businesses and software. Project-based, owner-dependent or declining industries tend to sell lower.
Where do appraisers get multiples?
From databases of completed private company transactions compiled from broker and appraiser reports, plus their own analysis. They then adjust for size, growth, risk and the terms of each deal.
Can I use a multiple from a listing site?
Listing data shows what sellers ask, not what buyers paid, and often doesn't say whether 'cash flow' is SDE or EBITDA. Use it to understand seller expectations, not value.
What multiple of earnings do small businesses sell for?
It varies widely with size, industry, owner dependence and earnings quality. Credentialed appraisers derive multiples from comparable transactions and adjust for the business. Be cautious with any single figure quoted without context.
Is a multiple of SDE the same as a multiple of EBITDA?
No. SDE includes one owner's pay; EBITDA doesn't. The same business has a higher SDE than EBITDA, so its SDE multiple is lower for the same price.
Sources
Related guides
General information, not legal, tax, financial or investment advice. Rules and lender practices change; check the linked sources and talk to your attorney, CPA and lender about your deal. Examples with named numbers are illustrations, not real businesses. OKtoBuy's Deal Check does not value businesses or give price opinions.