Understanding EBITDA Multiples by Industry

What Are EBITDA Multiples?

EBITDA multiples are one of the most commonly used valuation metrics in business transactions. The concept is straightforward: take a company's enterprise value and divide it by its EBITDA (earnings before interest, taxes, depreciation, and amortization) to get a ratio that represents how much buyers are willing to pay per dollar of operating earnings.

If a company generates $2 million in EBITDA and is valued at $12 million, its EBITDA multiple is 6.0x. Business valuation multiples like this provide a quick, intuitive way to benchmark a company's value against its peers and against historical transaction data.

EBITDA is the preferred earnings metric for multiples because it strips out the effects of capital structure (interest), tax jurisdiction (taxes), and accounting policy (depreciation and amortization). This makes it easier to compare companies on an apples-to-apples basis regardless of how they are financed or where they are located.

How EBITDA Multiples Are Used in Valuations

In practice, EBITDA multiples appear in two contexts. The first is comparable company analysis, where you look at the trading multiples of publicly listed companies in the same industry. The second is precedent transaction analysis, where you look at the multiples paid in actual acquisitions of similar businesses.

To estimate the value of a private company using this approach, you identify a set of appropriate comparables, determine the relevant multiple range, and apply it to the subject company's EBITDA. But selecting the right multiple is where the nuance lies. Industry is the starting point, but it is far from the only factor.

Typical EBITDA Multiple Ranges by Industry

The following ranges represent general market observations for mid-market transactions. Actual multiples for any specific business will vary based on size, growth, profitability, and the other factors discussed later in this article.

Technology and SaaS

Technology companies, particularly those with software-as-a-service models, consistently command the highest EBITDA multiples across industries. Typical ranges fall between 10x and 20x for established SaaS businesses, with some high-growth companies trading well above that range.

The primary drivers are recurring revenue models, high gross margins often exceeding 70%, strong customer retention, and significant scalability. A SaaS company with net revenue retention above 110% and predictable monthly recurring revenue is viewed by the market as a fundamentally different asset than a project-based technology services firm, which might trade at 6x to 10x.

Healthcare

Healthcare businesses generally trade in the range of 8x to 14x EBITDA, though there is significant variation across sub-sectors. Specialty physician practices, home health agencies, behavioral health platforms, and healthcare IT companies each have their own typical ranges.

Regulatory barriers to entry, aging demographics driving long-term demand, and the essential nature of healthcare services all contribute to relatively elevated multiples. Companies with a payor mix weighted toward commercial insurance and diversified referral sources tend to trade at the higher end of the range.

Manufacturing

Manufacturing companies typically see EBITDA multiples in the range of 5x to 8x, though this varies significantly based on the sub-sector and degree of specialization. Commodity manufacturers with thin margins and high capital requirements tend to sit at the lower end, while precision manufacturers serving aerospace, defense, or medical device markets can command multiples of 8x to 12x.

Proprietary technology, long-term contracts, specialized certifications, and high switching costs are the factors that push manufacturing multiples higher. The capital-intensive nature of the sector and its exposure to commodity price fluctuations are what keep average multiples below those of asset-light industries.

Retail and Consumer

Retail multiples typically range from 4x to 8x EBITDA for traditional brick-and-mortar operations. E-commerce businesses and direct-to-consumer brands with strong digital presences can trade higher, particularly if they have demonstrated a path to profitability with attractive unit economics.

Brand strength, customer loyalty, same-store sales growth, and omnichannel capability are the key differentiators. The sector faces structural headwinds from shifting consumer behavior and margin pressure from competitive dynamics, which keeps multiples moderate relative to technology and healthcare.

Professional Services

Professional services firms, including consulting, accounting, engineering, marketing, and staffing companies, generally trade in the range of 5x to 10x EBITDA. Firms with specialized niches, long-term client relationships, and scalable delivery models command premiums within this range.

The primary challenge for professional services valuations is the dependency on human capital. Firms where revenue is heavily tied to a small number of key individuals face a discount because of the risk that those individuals may leave after a transaction. Companies that have built institutional client relationships and diversified their talent base trade at the higher end.

Factors That Move Multiples Up or Down

Industry provides a starting framework, but the multiple any specific company commands depends on a combination of company-level factors.

Size Matters

Larger companies almost universally trade at higher multiples than smaller ones. A business generating $10 million in EBITDA will typically attract a higher multiple than one generating $1 million, even if they are in the same industry with similar growth rates. This size premium reflects lower perceived risk, greater operational resilience, and the broader pool of potential acquirers for larger businesses.

Growth Rate

Companies growing revenue and EBITDA at above-market rates justifiably command higher multiples. A business growing at 25% annually is worth more per dollar of current earnings than one growing at 5%, because a larger share of its value lies in future performance.

Margin Profile

Higher EBITDA margins generally correlate with higher multiples. A company converting 30% of revenue to EBITDA is viewed as more efficient and more resilient to downturns than one operating at 10% margins, all else being equal.

Revenue Quality

Recurring and contractual revenue commands a premium over project-based or one-time revenue. Subscription models, long-term service contracts, and high customer retention rates all signal predictability, which buyers value highly and reflect in the multiples they are willing to pay.

Customer Concentration

If a significant percentage of revenue comes from one or two customers, the business carries customer concentration risk. This typically results in a lower multiple because the loss of a single client could have an outsized impact on financial performance.

Management and Operations

Businesses with strong management teams that operate independently of the owner are valued more highly than those that are heavily owner-dependent. A well-documented, scalable operation signals lower transition risk and attracts a premium.

Using Multiples Wisely

EBITDA multiples are a powerful benchmarking tool, but they work best when used as part of a broader valuation framework. A multiple gives you a quick indication of relative value, but it does not tell you why a company trades where it does. Combining multiple-based analysis with a discounted cash flow model and a careful assessment of company-specific factors produces a far more complete and reliable valuation.

ValueAlpha provides industry-specific multiples alongside DCF analysis and comparable transaction data, giving you a comprehensive view of value rather than a single data point. The goal is never to rely on one number but to understand the range and the factors that determine where within that range a specific business falls.

When someone tells you a business is worth a certain multiple of EBITDA, the right response is always: compared to what, and why? Answering those questions is what separates a useful valuation from a number on a napkin.