Multiple (SDE/EBITDA)

Multiple — the ratio of price to earnings (SDE or EBITDA) at which a business trades: 2–3× SDE under ~$1M SDE, 3–5× EBITDA at $1–3M, with PH deals at or below the low end. The multiple compresses everything qualitative — revenue quality, customer concentration, owner dependence, transferability, industry trajectory. Low multiples are not bargains; they are the market pricing a job plus key-person risk. The craft is knowing which discounts you can fix (systems, marketing — an operator’s skills) and which ones fix you.

First used in: 4.2 · Buying cash flow: acquisition I