Valuation
Valuation Multiples Buyers Actually Pay
Rule-of-thumb multiples are marketing. Diligence multiples are math. Here is how BBG frames value for closely held companies.
Kevin ROCK Reiss1 min read
Owners remember a headline multiple from a conference hallway. Buyers remember the last deal that blew up in diligence. The gap between those two memories is where independent brokers earn their fee.
Recast first. Multiple second.
Seller’s discretionary earnings and recast EBITDA are not tricks. They are translations. Owner compensation above market, one-time legal costs, personal autos, and family on payroll all belong in the conversation — itemized, not waved at. A buyer who cannot trace the add-backs will haircut the multiple, which is more expensive than doing the work.
What actually moves a multiple
- Customer concentration under 20% for the top account.
- Documented processes and a manager who is not the founder.
- Recurring or re-order revenue versus project-by-project hunting.
- Clean books, separate entities, and no mystery related-party traffic.
- A market that is not one-reg-change away from a cliff.
Size still matters. A $400k SDE shop and a $4m EBITDA platform do not share a multiple, even in the same NAICS code. Capital structure matters too: SBA-backed owner-operators underwrite differently than family offices.
Price is not proceeds
An 5.5× on a note-heavy structure can net the seller less than 4.8× cash at close. We model working capital targets, debt-like items, earnouts, and tax posture before anyone falls in love with a headline number. Valuation that cannot survive a closing statement is theater.
Business Broker Group will tell you the number we can defend in a room with a lender, not the number that looks brave on a slide.
