Is your company’s EBITDA $1 million or more? Are you thinking a valuation of X5 to X7?

Here are some attributes that “might” get you to a X5 to X7 multiple of EBIDTA for a price for your business with an EBITDA over $1 million.

  • Limited customer concentration
  • EBITDA more like $2 or $3 million or more, which consistently has an EBITDA over 40%
  • Clean financial statements, which can be output into MS Excel
  • Repeating customers, ideally under a contract, no customer concentration over 10% of total sales
  • 15% to 20% growth, all signs point to this trend continuing.
  • Middle management that runs the business
  • Three years or more in business
  • Limited inventory
  • A niche market with a high cost of entry
  • Not directly tied to new construction
  • 15 or more W-2 employees
  • Accounts receivable that are well managed

As the owner, are you concerned for your employee and customers after the sale? 

The fact is that most companies with only some of these features will not bring in a X5 to X7 multiple, but still will bring in a nice price.  We would need to research what other similar businesses have sold for. There is an alternative called Employee Stock Option Plans (ESOP), which is an alternative to a conventional sale.  This deal structure has big tax advantages and provides for your employees’ retirement, with no cash contribution from employees and could pay you a X5 multipole of EBITA.  There could be issues which may or may not be a concern. An ESOP is not for all companies, but it is worth exploring and considering. Dolan Sales can help using a third-party professional with unique approaches and innovative solutions.  There is no cost for the consultation. Bob Dolan is a Licensed Real Estate Broker has over 45-years of experience selling businesses.