OnwardLesson 5.4
What a business like this is worth: size and the multiple
Most small businesses are valued as SDE or EBITDA multiplied by a number, called a multiple.
The short version
- Most small businesses are valued as SDE or EBITDA multiplied by a number, called a multiple.
- The clearest pattern in sale data is size. Bigger businesses generally sell for higher multiples.
- In Pepperdine's 2026 survey, the median business under $500,000 in price sold for about 2.5 times SDE. Businesses over $5 million sold for about 4.25 times.
- A median is the middle. Half of sales came in below it. Your business may sit above or below.
- The price that works is the one the earnings support and the lender will finance, not the asking price.
How value is built
SDE or EBITDA × multiple = value
The multiple is the number of years of earnings a buyer pays for. It is higher when earnings look safe and steady and lower when they look risky.
What the data shows
Each year Pepperdine University surveys business brokers on the sales they closed. Their 2026 report found median multiples that generally rise with size:
| Price of the business | Median SDE multiple | Median EBITDA multiple |
|---|---|---|
| Under $500,000 | 2.5 times | 3.0 times |
| $500,000 to $1 million | 2.1 times | 2.0 times |
| $1 million to $2 million | 3.0 times | 4.4 times |
| $2 million to $5 million | 3.25 times | 4.0 times |
| Over $5 million | 4.25 times | 7.5 times |
The climb is not perfectly smooth. The survey is small, and the middle sizes bounce around. The pattern across the full range is what to rely on.
What moves a multiple up or down
Up: steady or growing earnings, recurring revenue, many customers, a team that runs without the owner, clean books and a long lease or owned real estate.
Down: one large customer, an owner who does everything, falling results, thin records, a short lease or a business that depends on a license held personally.
Asking price is not value
An asking price is the seller's opening position. Compare it with the earnings you rebuilt in Lesson 5.3, the size benchmarks above and your ceiling from Lesson 3.4. If the asking price is well above all three, the gap is real, and a lender will see it too.
That does not mean walking away at once. It means knowing the gap before you make an offer.
Take this to your own people
The questions for this topic, for your attorney, your accountant or your lender.
- For your CPA or a valuation professional: "Based on the earnings we rebuilt, what range would a buyer reasonably pay?" Listen for: a range tied to earnings and recent sales, with reasons for where this business sits.
- For a lender: "At this asking price, would the loan pass your coverage test?" Listen for: a yes or no based on the actual earnings.
Figures from Pepperdine Private Capital Markets Report, 2026. Benchmarks describe what happened in other sales. They do not predict yours.
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