Common Industry Multiples & Sales Price in 2024

Looking to sell or buy a business? You’ll likely need to know the industry’s EBITDA, multiples, and sales price.

We scoured the internet to bring you this comprehensive list of common industry multiples and sale prices in 2024.

What is EBITDA?

EBITDA, short for earnings before interest, taxes, depreciation, and amortization, is a way for businesses to measure a business’s profitability by excluding non-operational expenses like interest, taxes, and depreciation. It’s often used in business valuation when a company is trying to sell or buy a business.

To calculate the business in question’s EBITDA, follow this formula:

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization.

The exclusion of non-operational expenses makes it easier to compare performance across different companies, but it’s important to remember it doesn’t account for capital expenditures or actual cash flow.

EBITDA Multiples by Industry

Here are common EBITDA multiples across different industries, according to Equidam.

Price/Sales by Industry

Here are the price/sales ratio by industry, according to NYU.

The Price-to-Sales (P/S) Ratio measures how much investors are paying for each dollar of a company’s revenue. It’s calculated by dividing a company’s market capitalization by its total sales, or the price per share by sales per share.

This metric is especially useful for assessing companies that aren’t yet profitable, focusing solely on revenue. A high P/S ratio suggests strong growth potential, while a low ratio may indicate undervaluation or challenges. Comparing the P/S ratio to industry peers provides better context for its significance.

Pros and Cons of EBITDA Multiples

There are advantages and disadvantages to using EBITDA to measure a company’s value.

EBITDA vs Other Valuation Metrics

Taking into account these cons, you may want to look further into other valuation metrics, depending on the industry your business is in, its size, and other special considerations unique to your company.

Check out these alternative options to EBITDA and see if they may be a better fit for your business:

• Net Income
  • What it is: Net Income is the profit remaining after all expenses, including interest, taxes, and depreciation, have been deducted from total revenue.
  • Difference from EBITDA: Unlike EBITDA, which focuses solely on core operating profit, Net Income considers the full impact of financial and tax-related decisions, providing a “bottom-line” view.
  • When to use: Net Income may be a better metric for businesses with high debt, complex tax structures, or significant non-operational expenses, as it reflects the actual earnings available to shareholders.

• Revenue Multiples
  • What it is: Revenue Multiples are valuation metrics that express the value of a business as a multiple of its total sales or revenue.
  • Difference from EBITDA: Revenue Multiples don’t account for profitability, making them distinct from EBITDA, which focuses on the operating earnings aspect. They’re more relevant to businesses prioritizing growth over immediate profit.
  • When to use: Revenue Multiples are useful for high-growth or early-stage companies with limited profitability, as they allow valuation based on revenue potential rather than current earnings.

• Discounted Cash Flow (DCF)
  • What it is: DCF is a valuation method that calculates the present value of projected future cash flows, adjusted by a discount rate to account for the time value of money.
  • Difference from EBITDA: While EBITDA looks at current operating earnings, DCF considers long-term cash flow potential, which can be essential for businesses with significant growth opportunities or planned future expansion.
  • When to use: DCF is ideal for businesses with predictable cash flows and growth potential, allowing investors to evaluate a company's value based on future earnings, rather than just its current profitability.

Frequently Asked Questions

What is the SaaS multiple for 2024?

The SaaS multiple for 2024 is around 6.

How much is a business worth with $2 million in sales?

Depending on the industry, a business with $2 million in sales is worth anywhere between $1 million (with a 0.5X multiplier) up to $10 million (with 5X multiplier).

What is the average multiple for a business valuation?

The average multiple for a business valuation ranges between 1.5x-3x.

What is a typical multiple of revenue?

A typical multiple of revenue, depending on other factors like industry, is 1 or 2.