When it comes to selling a business, the multiple of EBITDA is an essential factor to consider. Companies in high-growth markets can anticipate a considerable acquisition premium, which is an offer to buy that surpasses several times its most recent EBITDA. Generally, the multiple used is four to six times the EBITDA. The size and the level of EBITDA itself play a fundamental role in selecting a multiple of EBITDA, as larger companies are perceived to carry less risk and thus deserve higher multiples.
Forbes Business Council is a leading growth and networking organization for business owners and leaders. When making a business valuation for a private company based on a multiple of EBITDA, it's important to keep in mind that multiples of EBITDA may or may not be suitable depending on the size of the company. As a business owner, you may be wondering how much additional revenue or sales your company must generate to offset the decline in valuation multiples. The multiples of the EBITDA of these sales can be useful for valuing the business values of companies in similar situations for buyers in similar situations, but adjustments would have to be made.
Therefore, unless you are certain that your company will grow in the near future, postponing selling the company or at least some partial liquidity event carries significant valuation risk.