How do you calculate an EBITDA multiple?

An EBITDA multiple is a company's enterprise value divided by its EBITDA: earnings before interest, taxes, depreciation, and amortization. As a seller, you work it the other way: you restate your EBITDA, then multiply it by the multiple a buyer will pay. At 5 times, $2 million of EBITDA gives an enterprise value of $10 million.

The multiple usually reaches you inside someone else's sentence: a buyer says they pay six times EBITDA, or an advisor says companies like yours trade at five. Before you apply any multiple to your company, you need to know what is being multiplied, because the answer changes with every adjustment to the EBITDA beneath it.

What is an EBITDA multiple?

It is the price of a business expressed in years of its EBITDA: a multiple of 5 means the price equals five years of current EBITDA. The price here is enterprise value, which Harvard Business School Online describes as a company's debt and equity combined, adjusted for cash that is not used in operations.

Buyers use EBITDA multiples for private companies because they set aside how a company is financed, taxed, and depreciated. That makes two companies easier to compare.

How do you calculate it?

Divide enterprise value by EBITDA to find the multiple a price implies, or multiply EBITDA by a multiple to find the price it implies. The example below is an illustration, not a benchmark.

1. A company earns $2.0 million of adjusted EBITDA, and a buyer will pay 5.0 times that: $2.0 million × 5.0 = $10.0 million of enterprise value.
2. Subtract the $1.5 million of debt the business repays at closing.
3. Add the $0.4 million of cash the business holds.
4. The result, $8.9 million, is what the owners receive before taxes and fees.

Offers are often quoted on a cash-free, debt-free basis, so debt comes out of the proceeds and the cash stays with you. How debt, cash, and working capital are settled is written into the purchase agreement, so read how each is settled and model what you would actually receive before you sign.

What counts as EBITDA when you are selling?

Buyers start from your reported EBITDA and restate it, so the number they multiply is often different from the one on your income statement. The usual adjustments are these:

• Owner pay. If you take $400,000 and a hired manager would cost $200,000, a buyer adds back the $200,000 difference. If you pay yourself less than a replacement would cost, the adjustment runs the other way.
• Personal expenses paid through the business, such as a vehicle, travel, or a family member on payroll.
• One-time items, such as a legal settlement, an unusual project, or an insurance payout.
• Related-party arrangements, such as rent paid to you at a price above or below the market.

There is no single standard for adjusted EBITDA, so each adjustment is negotiated, and a buyer is most likely to accept the ones a document supports. Agree, too, which period the multiple applies to, whether the last fiscal year, the last 12 months, or a forecast. The same multiple gives a different price on a different period.

How does an EBITDA multiple differ from other multiples?

The difference is what the price is divided by.

What is a good EBITDA multiple?

There is no single good multiple. It depends on the size of the deal, the risk buyers see, and how much demand there is in your industry.

In its second-quarter 2026 report, the International Business Brokers Association (IBBA) put deals priced from $2 million to $5 million at 4.0 times EBITDA and deals from $5 million to $50 million at 5.8 times. In the same report, advisors saw the strongest buyer interest in manufacturing, distribution, and business services, and the weakest in restaurants and hospitality. That last finding is advisor sentiment, not completed deals.

Treat a published multiple as a range for planning, not as a price for your company. What moves an exit multiple covers what pushes yours up or down.

What to do next

1. Take three years of income statements and calculate reported EBITDA: net income plus interest, taxes, depreciation, and amortization.
2. List every adjustment with the document behind it: a payroll record, an invoice, a contract, or a settlement letter.
3. Recalculate EBITDA with the adjustments, and keep both numbers side by side so a buyer can follow the bridge.
4. Review the adjustments line by line before a buyer's team does.

We help you restate your EBITDA, document each adjustment, and work out a valuation range. That is part of our M&A advisory work.

Questions owners ask

Is EBITDA the same as cash flow?

No. EBITDA leaves out interest, taxes, capital spending, and changes in working capital, so the cash available to an owner is usually different. Buyers look at both, which is why the change in net working capital matters in a sale.

Why would a buyer subtract from my EBITDA?

When your pay is below what a replacement manager would cost, a buyer subtracts the gap, because the new owner has to pay that person. Restatement works in both directions, and a buyer applies the same scrutiny to revenue: see why growing revenue can still lower business value.