Blog Post
Selling a Small Business: What Is Your Company Worth?
Whether or not a business owner plans to sell or transfer their business in the near term, it’s common for them to want to know: What is my business worth?
The most accurate valuation would come from a professional assessment supported by accurate financial documents with modeling defined by comparable deals in your industry. Still, you can estimate your business’s value based on its EBITDA – defined as earnings before interest, taxes, depreciation, and amortization – multiplied by your industry multiple. (The Harvard Business Review calls the EBITDA method the simplest of six possible valuation methods.)
If you’re a business owner, you know the earnings information for your company. How do you find an industry multiple?
You’re in luck! This article covers the valuation data for six major industries in the state of Washington. It also provides links to valuation information for a host of other industries.
We’re covering:
- Accommodation and Food Services
- Commercial and Residential Property Management
- Infrastructure Construction
- Health Care and Social Assistance
- Manufacturing
- Retail
Before we dive into industry, let’s look at a rule of thumb for multiples of earnings, regardless of industry.
National Perspective Across Industries
Across sectors, the average business receives a multiple of two to three times earnings, according to BizBuySell, which uses “sellers discretionary earnings” (SDE) rather than EBITDA as the basis for its multiples.
BizBuySell aggregates data on sold companies between the third quarter of 2019 and the second quarter of 2024. The average price across all sectors for that time period is 2.49 times SDE.
Where a valuation was based on a revenue multiple, BizBuySell reports a range from 0.4 to 1.2, with the average across all businesses at 0.64.
“The median sale price…is $375,000 in Q2 of 2024,” the business listing service said in its report. “Most businesses in the data set sold for less than $1,000,000 – putting these multiples in the ‘Main Street’ segment of small businesses.”
Curious about your industry? Connect with a Coastal banker to receive a local report from Vertical I.Q. for your business and industry.
Accommodation and Food Services
Since we’re reporting on major Washington industries, which the U.S. Census Bureau tracks using the North American Industry Classification System (NAICS), it might not be apparent if your business is an “Accommodation and Food Service.”
Which businesses does that category apply to?
According to the industry intelligence company Vertical I.Q., the sector covers businesses preparing meals, snacks, and beverages based on customer orders and for immediate consumption. It also covers bars and short-term lodging for travelers and vacationers. Restaurants and other dining establishments comprise about 78% of this sector, with traveler accommodations accounting for 9% and drinking establishments at 5%. The remaining 8% is specialty food services, R.V. and recreational parks, and rooming houses.
According to data on 2,405 transactions gathered by DealStats and published by Vertical I.Q., restaurants’ median for price to EBITDA was 2.31 times.
BizBuySell also publishes a list of multiples for Main Street or core downtown businesses that serve food, showing the following multiples to SDE:
| Food and Restaurants | Revenue Multiple | Earnings Multiple | Median Sale Price |
| Bakeries | 0.48 | 2.19 | $200,000 |
| Bars, Pubs and Taverns | 0.49 | 2.64 | $275,000 |
| Breweries | 0.58 | 3.58 | $315,000 |
| Coffee Shops and Cafes | 0.45 | 2.14 | $136,000 |
| Donut Shops | 0.66 | 2.4 | $192,500 |
| Food Trucks | 0.63 | 1.69 | $94,750 |
| Ice Cream and Frozen Yogurt Shops | 0.56 | 2.38 | $150,000 |
| Juice Bars | 0.41 | 1.97 | $125,000 |
| Restaurants | 0.38 | 2.08 | $200,000 |
According to Vertical I.Q., while consumer sentiment has sustained unusually low levels, high price levels have limited consumer expenditure on food services. Yet, sales for this industry are forecast to grow at a 4.97% compounded annual rate from 2024 to 2028, faster than the overall economy’s growth.
Property Management Companies
Commercial property management companies maintain real estate, such as office buildings, industrial buildings, warehouses, and other nonresidential buildings. According to data on ten transactions gathered by DealStats and published by Vertical I.Q., commercial property management companies fetch a median price to EBITDA of 2.99.
According to Vertical I.Q., commercial property managers have economic winds to their front and back. Commercial real estate (CRE) ownership is increasingly shifting to institutional owners, such as pension funds, insurance companies, real estate investment trusts (REIT), and other financial entities, which are more likely to outsource property management to a third party.
Yet, high interest rates and sweeping pandemic-driven changes to office property usage have put significant pressure on specific sectors of CRE. Still, demand for offices – especially those with desirable technology, amenities, and flexible space – is projected to grow. According to Vertical I.Q., sales for commercial property managers are forecast to grow at a 6.11% compounded annual rate from 2024 to 2028.
Companies that manage residential rental properties have drawn a wide range of multiples, according to DealStats and Vertical I.Q. For the 308 deals studied, the median for price to EBITDA was 3.07.
Sales for the residential property managers are forecasted to grow at a 5.66% compounded annual rate from 2024 to 2028.
Infrastructure Construction
Let’s look at companies that build transportation-related infrastructure, including highways, roads, streets, airport runways, and bridges. These businesses may also perform other types of heavy construction, such as the development of dams, water distribution systems, and rail systems.
According to the 13 deals studied by DealStats, these businesses garner an attractive 4.17 median multiple on EBITDA. According to Vertical I.Q., sales for the companies that build highways, streets, and bridges are forecast to grow at a 4.81% compounded annual rate from 2024 to 2028.
Businesses constructing utility systems – such as water, sewer, petroleum, gas, power, and communication systems – also pull in appealing multiples. The 55 deals studied by DealStats show an average multiple on EBITDA of 13.
Sales for highway, street and bridge construction companies industry are forecasted to grow at a 4.81% compounded annual rate, and for utility system construction companies at 6.02% rate, from 2024 to 2028.
Health Care and Social Assistance
Companies in this sector cover a wide range of services. While they often serve the elderly and disabled through centers, companion services, non-medical homecare services, and disability support groups, this cohort also includes adoption agencies, youth centers, foster care services, teen outreach programs, and child welfare services.
Demand for services for the elderly is projected to grow as the U.S. population ages, according to Vertical I.Q. More than 20% of U.S. residents are projected to be aged 65 and over by 2030. The number of U.S. residents aged 65 and older is projected to grow from 56 million in 2020 to 73 million in 2030 and 85 million in 2050. The elderly population in the U.S. is also forecast to become more ethnically and culturally diverse in the coming decades.
According to data on 51 transactions gathered by DealStats and published by Vertical I.Q., the median price to EBITDA for this type of business is 4.05.
BizBuySell’s valuation report also has data for related businesses not reported by Vertical I.Q., again these are multiples in terms of EDS.
| Health Care and Fitness | Revenue Multiple | Earnings Multiple | Median Sale Price |
| Assisted Living and Nursing Homes | 1.4 | 4.42 | $695,000 |
| Dance, Pilates, and Yoga Studios | 0.6 | 1.91 | $95,000 |
| Dental Practices | 0.7 | 2.36 | $342,500 |
| Gyms and Fitness Centers | 0.65 | 2.41 | $200,000 |
| Home Health Care Businesses | 0.62 | 3 | $672,500 |
| Medical Practices | 0.73 | 2.17 | $400,000 |
Manufacturing
Manufacturers generally produce either durable or nondurable goods. Durable goods include wood products, metal products, machinery, computers, furniture, and vehicles. Nondurable goods are those consumed quickly, such as food and beverages, textiles and apparel, petroleum products, chemicals and pharmaceuticals, paper products, and plastics.
As you can imagine, the number of companies and range of products manufactured by this industry is quite large. Each sub-sector has sub-sectors. The largest population of U.S. manufacturers – ranked by sales – produce durable goods. Transportation equipment manufacturers (35%) as the largest cohort of this sector, followed by fabricated metals (13%), machinery (13%), and computers and electronic products (11%). The largest nondurable goods segments are food (26%), chemicals (27%), petroleum refining (22%), and plastics and rubber products (8%).
While Vertical I.Q. does not report business valuation data for the industry as a whole, it does report it for sub-sectors, such as auto parts manufacturers and architectural and structural metals. The median price to EBITDA across 48 acquisitions of auto parts manufacturers was 7.48 times. Across 88 deals for architectural and structural metals manufacturers, the median price to EBITDA multiple was 4.92 times.
While the breadth and scope of the manufacturing sector are enormous, Vertical I.Q. does report a sales forecast for the industry as a whole, projecting growth of 2.8% compounded annually from 2024 to 2028.
Retail
Similar to manufacturing, the retail sector covers large international companies and small Main Street boutiques. Growth for this sector has slowed significantly since 2021, when it posted a 17.08% increase in the number of companies, now at 3.7% in 2024.
Vertical I.Q. projects the industry will hover between a 3.7% and 4.17% growth rate from 2024 through 2028, with sales forecasted to grow at a 3.92% compounded annual rate during that same period.
BizBuySell provides the most helpful data for retail as the higher populations of these companies are Main Street businesses. SDE multiples for this sector are:
| Retail | Revenue Multiple | Earnings Multiple | Median Sale Price |
| Bike Shops | 0.43 | 2.62 | $226,500 |
| Clothing and Accessory Stores | 0.49 | 2.27 | $190,000 |
| Convenience Stores | 0.38 | 2.26 | $187,500 |
| Dollar Stores | 0.34 | 1.37 | $94,900 |
| Flower Shops | 0.45 | 1.94 | $180,000 |
| Furniture and Furnishings Stores | 0.53 | 2.55 | $450,000 |
| Grocery Stores and Supermarkets | 0.33 | 2.64 | $417,750 |
| Health Food and Nutrition Businesses | 0.52 | 2.14 | $175,000 |
| Jewelry Stores | 0.52 | 2 | $177,500 |
| Liquor Stores | 0.46 | 3.09 | $395,000 |
| Nursery and Garden Centers | 0.57 | 2.85 | $495,000 |
| Pawn Shops | 0.93 | 2.56 | $218,825 |
| Pharmacies | 0.38 | 2.57 | $337,500 |
| Smoke Shops | 0.44 | 1.83 | $140,000 |
| Vending Machine Businesses | 1.13 | 2.36 | $86,000 |
Getting to Your Number
Applying the EBITDA multiple to your business can provide a sense of what you would receive if you sold it. The best valuation, however, will come from certified professionals who know your industry and the process of selling your company.
Reach out to brokers who specialize in your industry and interview them. They also tend to gather lists of buyers and sellers who may value a connection. They can also connect you with owners who have already sold and may be willing to be mentors. Also, connect with a Coastal banker to receive a local Vertical I.Q. report for your business and industry.
Either way, getting acquisition professionals in your corner is the best way to gauge if and when you should exit your company.
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