Business Valuation Multiples by Industry: A 2026 Reality Check

Most owners come to me already wrong about what their business is worth. Not by a little. By a factor of two, sometimes three. And when I ask where the number came from, the answer is almost always the same: somebody on the internet told them an industry multiple.

Here is the problem. A business valuation multiple by industry is a number buyers and lenders use as a starting point, calculated by dividing comparable sale prices by the seller's earnings to produce an SDE or EBITDA multiple. For small businesses across the country, the average sits right around 2.6x to 2.7x SDE per BizBuySell's transaction data on roughly 9,500 closed deals last year.

But "average" hides everything that actually matters.

The Short Version

• The average small business sells at roughly 2.6x to 2.7x its seller's discretionary earnings (SDE) in 2026, but ranges run from about 1.4x for distressed retail to nearly 5x for car washes and HVAC platforms.

• Industries with recurring revenue, licensing barriers, and active private equity buyers (HVAC, plumbing, dental, insurance, car washes) trade at the highest multiples. Restaurants, independent pharmacies, and small Amazon FBA brands trade at the lowest.

• Deal size moves multiples more than industry does. Businesses under $500K trade around 2.0x SDE, while businesses with $5M to $50M in value trade around 6.5x EBITDA per the IBBA Market Pulse Q3 2025 Survey.

• The shift from SDE to EBITDA happens around the $2M revenue mark, when buyers start pricing in a hired manager instead of an owner-operator.

• Owner dependency, customer concentration, and growth rate make a bigger difference inside any industry than the industry average itself.

What Are Business Valuation Multiples?

A business valuation multiple is a number used by buyers, sellers, and lenders to put a price on a business by multiplying its earnings by a ratio derived from comparable transactions. For small businesses owned and operated by one person, the multiple is usually applied to seller's discretionary earnings (SDE). For larger businesses with management teams, it is applied to EBITDA.

Same business. Different math depending on size.

The two most common multiples are:

• SDE multiple: Used for small, owner-operated businesses, generally under $2 million in earnings. SDE captures the total economic benefit one full-time owner gets from the business: profit, the owner's salary, perks, depreciation, interest, and one-time expenses added back.

• EBITDA multiple: Used for businesses where a hired manager runs operations, generally above $2 million in revenue or $500K in EBITDA. EBITDA strips out the owner's compensation and replaces it with a market-rate manager.

For a deeper breakdown, our SDE vs. EBITDA explainer walks through the difference with real examples.

Average Business Valuation Multiples by Industry (2026)

Here is what the data actually says. The table below pulls average SDE and revenue multiples from BizBuySell's five-year dataset (Q1 2021 through Q4 2025), which tracks roughly 50,000 listings and broker-reported closed transactions. These are owner-operated small businesses, generally under $2M in price.

Industry (Owner-Operated)	Avg Revenue Multiple	Avg SDE Multiple	Median Sale Price
Construction & Trades	0.58x	2.62x	$750,500
HVAC (small)	0.59x	2.79x	$750,000
Plumbing	0.67x	2.51x	$649,500
Healthcare & Medical	0.76x	2.74x	$441,162
Dental Practices (solo)	0.77x	2.77x	$350,000
Manufacturing	0.73x	3.03x	$726,914
Professional Services	0.82x	2.59x	$350,000
Accounting & Tax Practices	1.07x	2.23x	$424,000
Insurance Agencies	1.52x	2.86x	$497,500
Online & Tech (incl. SaaS small)	1.09x	3.33x	$850,000
Food & Restaurants	0.42x	2.24x	$200,000
Auto Repair Shops	0.64x	2.83x	$414,000
Car Washes	2.01x	4.99x	$800,000
Landscaping & Yard Service	0.70x	2.46x	$425,000
Pest Control	0.99x	2.40x	$249,000
Retail (overall)	0.54x	2.61x	$286,000
Wholesale & Distribution	0.55x	2.91x	$604,000
Property Management	0.93x	2.70x	$397,500

This is the directional starting point. It does not mean your HVAC business is worth 2.79x SDE because that is the BizBuySell average. It means the average HVAC business that closes on BizBuySell, with all its warts, sells at that multiple. Your business is probably better or worse than the average. Most are.

A bigger HVAC business, say one doing $3M to $5M in revenue with maintenance contracts and a service manager, can clear 6x to 8x EBITDA. Platform-level deals trade north of 10x. Blackstone bought Champions Group, a residential HVAC, plumbing, and electrical platform, in 2025 at an implied multiple in the high teens per Profitability Partners. That is not your reality at the small end. But it shows what scale and recurring revenue do to the math.

If you want a real number for your specific business, that is what a proper business valuation is for. The industry average is a sanity check, not an answer.

Why Do Multiples Vary So Much Between Industries?

Buyers and lenders are pricing in risk. When you understand what they are actually paying for, you understand why a car wash sells at 5x SDE and a full-service restaurant sells at 2.15x.

Six factors move the needle inside any industry, and across them:

1. Recurring revenue. Subscription, contract, and maintenance-based revenue trades at 1.5x to 2.5x higher multiples than one-time transaction revenue per Sofer Advisors. An HVAC company with maintenance contracts can clear 4x to 6x SDE while the same-size HVAC built around new construction trades at 2x to 4x.

2. Barriers to entry. Licensed industries (HVAC, plumbing, dental, medical, insurance) carry defensible market positions. Anybody can start a cleaning company tomorrow. Not anybody can pull a master plumber license.

3. Owner dependency. A business that does not run without the owner is functionally unsellable above 1.5x to 2.0x SDE no matter what industry it is in. I have seen this play out more times than I can count. Owner takes every call, owner does the bidding, owner trains every employee. Buyer walks.

4. Capital intensity. Manufacturing, trucking, and heavy construction need capex that eats into free cash flow. Capital-light businesses (SaaS, professional services, ecommerce) generate higher cash conversion at the same EBITDA, which is why they get higher multiples on the same earnings.

5. Customer concentration. Any single customer over 20% of revenue gets discounted. Over 40% gets discounted hard. This is brutal in B2B services and contract manufacturing.

6. Private equity activity. When PE money is flowing into a sector, multiples expand for everyone in it. Insurance brokerages have seen multiples climb from 9.4x to 12.1x EBITDA since 2020 per Sica Fletcher. Restaurants, by contrast, get almost no PE attention and trade like it.

I had a guy come to me a couple years back. Owned a successful contracting business. Did good work. Made good money. He wanted me to tell him it was worth 6x EBITDA because that is what he had read online. Problem was, he answered every customer call himself, drew up every estimate, and ran every job site. Without him, the business stopped. There was no transferable system.

We talked it through, and instead of listing it, he spent the next eighteen months building out a foreman, a dispatcher, and a documented sales process. When we came back to the market, he got close to what he originally wanted. Not because the multiple changed. Because the business changed.

That is what real valuation work looks like. Not chasing a number. Building toward it. Our exit planning service exists exactly for situations like that one.

How Does Deal Size Affect the Multiple?

Deal size matters more than industry in most cases. The IBBA Market Pulse Q3 2025 Survey publishes the cleanest data on this, broken out by enterprise value tier:

Business Value Tier	Median Multiple (Q3 2025)	Multiple Type
Under $500,000	2.0x	SDE
$500,000 to $1M	2.5x	SDE
$1M to $2M	3.0x	SDE
$2M to $5M	4.0x	EBITDA
$5M to $50M	6.5x	EBITDA

Notice what happens between the $1M to $2M tier and the $2M to $5M tier. The unit of measurement shifts from SDE to EBITDA. That is not a quirk. It reflects how buyers think. Below $2M of value, the buyer is usually a self-funded individual or an SBA borrower replacing the owner's labor with their own. Above $2M, the buyer is usually a financial buyer or strategic acquirer who plans to hire a manager. Different math, different multiples, different buyer pool.

The practical takeaway: growing earnings is non-linear in value creation. A landscaping company at $125K SDE might sell at 2.0x for $250K. The same company growing to $400K SDE moves into the $1M to $2M tier at 3.3x, valuing it at $1.32 million. Earnings tripled. Value went up more than 5x.

That is why the conversation about selling should usually start two or three years before you actually want to sell. Our guide to preparing your business for sale walks through what those years should look like.

How does the SDE multiple turn into the EBITDA multiple?

The shift happens at roughly $2M in revenue or $500K in EBITDA. At that point, buyers stop assuming the new owner will work in the business and start assuming a hired manager will run it. They subtract a market-rate salary from SDE, get to EBITDA, and apply a different multiple. The same business reads differently to different buyer pools, which is why the same business can carry both an SDE valuation and an EBITDA valuation depending on who is buying.

Where the Industry Multiple Data Actually Comes From

Most of the industry multiple numbers floating around the internet come from one of four databases. They are not the same. The differences matter.

• BizBuySell. Owned by CoStar. Tracks roughly 50,000 listings and reported closed transactions. Free reference data. Heavily weighted toward Main Street deals (median sale price around $337,750). Best for directional benchmarks.

• DealStats (BVR). Industry standard for certified business appraisers. Over 41,000 transactions back to 1990. Strong representation across the size spectrum. Subscription-based.

• ValuSource Market Comps and BIZCOMPS. Largest historical small business comp database. ValuSource Market Comps holds over 49,000 comps. BIZCOMPS holds approximately 12,000 transactions, with about 94% under $1M in deal size.

• Peercomps. SBA-financed deals only. Over 16,000 transactions since 1999. Cleaner data because the source is consistent (SBA lenders), but limited to deals using SBA 7(a) financing.

When somebody quotes you a multiple, the right question is: which database did that number come from? An EBITDA multiple from NYU Stern's Damodaran data (built on public companies) is going to run way higher than what a private small business actually trades at. I see brokers and advisors quote those numbers all the time. It is misleading. Public companies trade at multiples that small private businesses will almost never see.

For most owners, the workflow is: start with BizBuySell for a rough benchmark, get a market valuation from a qualified business broker, and pay for a certified third-party valuation if the business is over about $500K in value or you are dealing with divorce, estate, or SBA-required appraisals.

Where Owners Get the Multiple Wrong

Three patterns I see, over and over.

First, owners pick the highest number they read. They Google "HVAC valuation multiple," see "10x EBITDA" somewhere, and anchor on it. That 10x is for a $50M revenue platform with maintenance contracts and a management team. Not for the $1.2M owner-operated shop. The multiple ranges in this article all have low-end and high-end numbers. Most owners are not at the high end. Some are. Most are not.

Second, owners apply the multiple to the wrong number. SDE is not the same as net income. EBITDA is not the same as cash flow. If the multiple says 3x SDE, you have to know what your real SDE is, which means clean financials, proper add-backs, and ideally a Quality of Earnings review for anything over $2M. Garbage in, garbage out.

Third, owners forget that the multiple is the result, not the input. A multiple is an artifact of a transaction that already happened. It tells you what other businesses sold for. It does not tell you what yours will sell for. That depends on your specific buyers, your specific market timing, your specific story, and how well it is sold.

That is exactly the kind of mess we help sellers avoid. Most of the time, the gap between what an owner thinks the business is worth and what it actually sells for is not the multiple. It is everything around the multiple.

What is a good multiple for a small business?

For most small, owner-operated businesses in 2026, a "good" multiple lands somewhere between 2.5x and 3.5x SDE. Anything above 4x SDE for a sub-$2M business is unusual and almost always tied to recurring revenue, strong management depth, a sticky customer base, or active PE interest in the sector. Anything below 2x usually points to owner dependency, customer concentration, or declining performance.

Are valuation multiples higher in 2026 than they were in 2024?

Slightly, yes. The BizBuySell average cash flow multiple moved from 2.57x in 2024 to 2.61x in 2025 to 2.7x in Q1 2026. The bigger story is in the lower middle market: deals in the $5M to $50M segment have moved from about 5.0x EBITDA in 2022 to 6.5x in Q3 2025 per the IBBA Market Pulse, the most pronounced expansion in the dataset. Small deals are flat. Larger quality deals are paying up.

What Your Multiple Actually Depends On

Forget the industry average for a second. Inside any industry, the multiple your business gets depends on a short list of things buyers care about. Walking into a sale knowing how you stack up on these is the difference between getting the median multiple and getting a top-quartile one.

• Are your books clean? Three years of tax returns, P&Ls that match, properly documented add-backs. If your books look like a shoebox, the buyer assumes the worst.

• Can the business run without you for 30 days? Take a vacation. See if the business survives. If it does not, you are not selling a business; you are selling a job.

• What percent of revenue is recurring? Contracts, subscriptions, maintenance agreements. Higher is better. Always.

• What is your top customer concentration? No single customer over 20% if you can help it.

• Is revenue growing, flat, or declining? Three years of growth gets a premium. Decline gets a discount, even with strong margins.

• Is your management team transferable? Key employees who will stay through transition matter more than most owners realize.

Those six factors decide whether you are at the bottom, middle, or top of your industry's range. Not the industry itself.

The Bottom Line

Industry multiples by themselves are useful as a sanity check. They are not useful as an answer. The owners I have worked with who got the strongest sale prices were not the ones with the rarest businesses. They were the ones who understood, well in advance, what the multiple was actually paying for, and who built toward it.

If any of this sounds familiar, you probably already know you need to talk to somebody who has been through this before. That is what we do. Whether you are looking to sell your business, buy one, or just want to know where you actually stand in your industry, get in touch. We will tell you the truth, even when it is not what you want to hear.

Frequently Asked Questions

What are business valuation multiples by industry?

Business valuation multiples by industry are average ratios used to estimate what businesses in a given sector sell for, calculated by dividing closed sale prices by the seller's earnings (SDE for small businesses, EBITDA for larger ones). In 2026, the U.S. small business average is roughly 2.6x to 2.7x SDE per BizBuySell, with industry-specific ranges running from about 1.4x to 5x or higher.

Which industries have the highest valuation multiples?

The highest multiples in 2026 are in industries with recurring revenue, licensing barriers, and heavy private equity activity. Insurance agencies trade at roughly 11.8x EBITDA per Sica Fletcher. HVAC platforms and dental DSOs trade at 9x to 11x EBITDA. Car washes lead BizBuySell's owner-operator data at 4.99x SDE. Restaurants, dollar stores, and independent pharmacies sit at the bottom.

How do you calculate a business valuation multiple?

You divide the sale price by the earnings figure. For small owner-operated businesses, that is sale price divided by SDE (seller's discretionary earnings). For larger businesses, it is sale price divided by EBITDA. Comparable transaction databases like BizBuySell, DealStats, BIZCOMPS, and Peercomps publish industry averages calculated this way across thousands of closed deals.

Why do my business broker's numbers differ from online industry averages?

Online averages cover all businesses in an industry, including the worst ones. A broker valuing your specific business adjusts for cleanliness of books, owner dependency, recurring revenue, customer concentration, growth rate, and management depth. Two businesses in the same industry with the same revenue can sell for double-digit percentage differences in multiple based on these factors alone.

What is a typical EBITDA multiple for a small business in 2026?

For private companies in the lower middle market, the median multiple was about 3.5x to 3.8x EBITDA through 2025 per the DealStats Value Index. PE-sponsored deals in the $3M to $5M EBITDA range held at roughly 6.4x in 2025 per GF Data, while deals over $10M EBITDA cleared above 8x. Multiple expansion above $2M EBITDA is sharp and consistent across most industries.