Multiples are the language of business valuation. When a broker says "this business is worth 3.5×," they mean 3.5 times the business's normalised earnings. Apply that to your own EBITDA or SDE and you have an indicative sale price.
But multiples are a range, not a fixed number. This guide covers the actual ranges by size and industry, what moves a business to the top vs the bottom of the range, and how to apply this to your own situation.
EBITDA vs SDE — which one matters?
For small businesses (under $1M in earnings), brokers typically use SDE (Seller's Discretionary Earnings) — net profit + owner's wages + add-backs. SDE represents what a single working-owner takes home.
For mid-market and larger businesses ($1M+), EBITDA is more common — Earnings Before Interest, Tax, Depreciation, Amortisation. EBITDA assumes owner's wages are already a market-rate cost (because there's usually a manager separate from the owner).
When applying multiples, make sure you're comparing apples to apples. SDE multiples and EBITDA multiples are different — EBITDA multiples are typically higher because EBITDA itself is a smaller number.
Australian multiples by business size (2026)
| Size | Earnings basis | Typical multiple | Why |
|---|---|---|---|
| Micro (under $250k) | SDE | 1.5–2.5× | Higher risk, owner-operator dependency |
| Small ($250k–$1M) | SDE | 2.5–4.0× | Some systems, partial team, growing transferability |
| Mid-market ($1M–$5M) | EBITDA | 3.5–6.0× | Real management team, lower owner-dependency |
| Lower large ($5M–$20M) | EBITDA | 5.0–8.0× | Strategic value, multiple buyer types |
| Large (over $20M) | EBITDA | 6.0–12.0×+ | Institutional buyers, premium for scale |
Industry multiples (rough ranges)
| Industry | SDE multiple range | Notes |
|---|---|---|
| Trade/services (with 2IC) | 2.5–3.5× | Higher if recurring service contracts |
| Cafés/restaurants | 1.5–2.5× | Heavily location-dependent |
| Hospitality (pubs, hotels) | 2.5–4.5× | Often valued separately on freehold + business |
| Retail | 1.5–3.0× | E-commerce premium for established online presence |
| Health/medical practices | 3.0–5.0× | Premium for goodwill + recurring patients |
| Professional services | 2.5–4.0× | Big premium for non-owner-dependent revenue |
| Manufacturing | 3.0–5.0× | Asset-heavy, lower operational risk |
| SaaS/recurring revenue | 4.0–8.0×+ | ARR-based valuations more common than SDE |
These are starting points, not laws. Industry-specific structures (real estate broker GCI multiples, accountant firm fees-base multiples) may apply differently. Café and restaurant specifics here.
What moves a multiple up or down
Two identical businesses on paper can sell for very different multiples. The big drivers:
Up (buyers pay more)
- 30%+ recurring revenue (subscriptions, contracts, retainers)
- Revenue diversified across many customers
- 5+ years remaining on the lease
- Owner works under 20 hrs/week
- Documented systems and trained team
- Three years of growing or steady profit
- Strong online presence + brand
Down (buyers pay less)
- Top customer over 30% of revenue
- Owner is irreplaceable
- Lease expiring within 2 years
- Declining profit trend
- Industry shrinking or facing disruption
- Messy or inconsistent financials
- Pending litigation or ATO debt
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Perth trade business with the following:
- Reported net profit: $180k
- Owner's salary (already drawn): $120k
- Add-backs (vehicle + personal expenses): $25k
- Normalised SDE: $325k
Mid-range trade multiple: 3.0×. Indicative value: $975k.
But the same business with a 2IC running operations, recurring service contracts (40% of revenue), and 5 years on the lease could justify 3.5–4.0×. New range: $1.13M – $1.30M. Same earnings, different multiple, $250k+ difference in sale price.
This is exactly the gap that the 12 Steps guide exists to close.