Guide
What actually drives the multiple, and why we publish none
Updated
The most searched part of this subject is the part with the least reliable public information, and the mismatch is not an accident. A multiple is a summary of what happened in a set of comparable transactions. Detached from that set it carries almost no information about any particular business.
Why this site publishes no multiple
Because no public source sets one for a specific business, and a range published without the comparable transactions behind it is a guess given the appearance of a rate. Broker surveys are real data about the deals those brokers reported, which is not the same as a benchmark for yours.
The failure mode is specific and expensive. An owner reads a range, anchors on the upper end, declines a fair offer, and spends a year discovering the range did not describe their business. Publishing what drives the multiple is more useful than publishing the multiple, because it is the part you can act on.
What raises it
Earnings that continue without the owner. This is the largest single factor in the small business market, and it is why a management team is worth more than the salaries it costs.
Revenue that recurs under contract, with a demonstrable renewal history. Customer diversity, so that no single account can take the business down. Records that survive scrutiny, because a buyer prices uncertainty. A secure lease or owned premises where location matters. And a market position that is defensible for a reason a buyer can name.
What lowers it
Customer concentration, which is the fastest of all. Owner dependence, where the relationships, the technical knowledge or the pricing authority sit with one person who is leaving. A short or insecure lease on premises the business cannot move from cheaply.
Deferred capital spending, since a buyer prices the machine they have to replace next year. Key-person risk generally. And unreliable records, which do not lower the price by the amount of the doubt but by the amount a cautious buyer needs to be compensated for it.
Where a real multiple comes from
Completed transactions in your industry, at your size, in your region, structured the way yours would be. Business brokers and valuation firms buy access to transaction databases for exactly this, and the value of the subscription is the comparable set rather than the average.
When you receive a valuation, the question to ask is not what multiple was used. It is which transactions produced it, how many there were, and how they were adjusted to match your business. A valuation that cannot answer that has used a rule of thumb and called it a market approach.