Multiple
A multiple is the ratio of enterprise value to adjusted EBITDA. A verdict on risk, size, and growth.
In a sale
How do buyers decide on a multiple?
Buyers reach a multiple by judgment, not by looking it up: how large the business is, how fast it is growing, and how risky its future cash flows are. Every business in an industry sits somewhere in a range. Where a business lands in that range is decided by evidence, and much of that evidence is produced long before a sale.
Where it comes up
Read it in context
In the articles
- Where founders leave money on the tableMost of what founders lose in a sale is lost in their own decisions, and each one has a fix.
- The 4.5x problemMost founders assume their business is worth the trade multiple. That assumption costs millions.
- Same business, two outcomesTwo identical businesses, one prepared and one not, sell for very different prices.
- An add-back is an argumentAdjusted EBITDA is built, not declared, and the buyer's accountants will rebuild it.
- The owner-dependency trapThe more the business needs you, the less a buyer pays, and the longer you stay.
- When a buyer calls firstAn inbound offer is information, not a decision.
- Diligence yourself firstEvery business has issues. The question is who finds them.
- Real estate and the operating businessOwner-held real estate is a second transaction inside the first.
- Bigger before you sell: combinations and add-onsSometimes the best pre-sale move is an acquisition of your own.
- What the buyer's memo says about youBefore any offer, someone writes an internal memo. Here is what is in it.
In The FNDRS Playbook
- PB02 The multiple rangeYour industry has a range. Where you land is decided by evidence.
- PB03 The category ladderBuyers price the category before they price the company.
- PB05 The owner dependency scaleThe more the business needs you, the less a buyer will pay for it.
- PB08 The buyer lens scorecardThis is what a buyer’s first internal memo says about you.
- PB09 The size premium staircaseBigger businesses get higher multiples. Not because of size, but because of what size proves.
- PB25 The combination matrixSometimes the best pre-sale move is an acquisition of your own.
- PB10 The adjusted EBITDA bridgeAdjusted EBITDA is built, not declared.
- PB11 The add-back defensibility matrixAn add-back is an argument. Some arguments win.
See the terms with your own numbers
The Go-To-Market Analysis (GTMA) builds the file a buyer would build on your business, before a buyer does.