Two businesses each earn $3.2M in annual EBITDA. One relies heavily on its founder and a major customer. The other has a management team, a broader customer base and more predictable revenue.
Suppose a buyer applied a 4.0× multiple to the first and 7.5× to the second. Their indicative enterprise values would be $12.8M and $24.0M: a difference of $11.2M on the same earnings.
The example shows why earnings alone do not explain value. It does not establish the multiple either business would receive in a real sale.
What the assumptions represent.
The buyer needs to form a view on whether earnings will continue, what investment will be required and how much risk comes with the business. Relationships, management, contracts and reliable reporting help inform that view.
Those factors interact. There is no fixed tariff that turns a better score in each area into an additional fraction of a multiple.
What an owner can take from it.
Look at the durability of the earnings as well as their size. Identify which risks can be reduced, what evidence would demonstrate the change and how long that work needs to become established.
Which company is yours?
A Commercial Assessment tells you where you sit on each of these drivers, what the gap is worth, and what to evidence first. Two to four weeks, fixed fee.
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