Industry valuation multiples are the fastest sanity-check on any business valuation. But applied without context, they produce numbers that are wildly off. Here’s what they actually mean, why they vary, and how to apply the right one to your business.
What a multiple is
A valuation multiple expresses enterprise value as a ratio to a financial metric. The two most common:
- EV/Revenue: Enterprise value divided by trailing 12-month revenue. A 2× multiple means a business with $1M in revenue has $2M in enterprise value.
- EV/EBITDA: Enterprise value divided by trailing 12-month EBITDA. A 10× multiple means a business with $500k in EBITDA has $5M in enterprise value.
Multiples aren’t arbitrary. They emerge from what buyers have actually paid for comparable businesses, adjusted for market conditions. The academic reference most valuers use is Professor Aswath Damodaran’s NYU Stern dataset, which publishes quarterly updates covering 90+ industry categories globally.
Why multiples vary so much by industry
Three drivers explain most of the variation:
1. Growth rate expectations
High-growth industries (software, biotech, renewables) trade at higher multiples because buyers are pricing in continued growth. A business at 20% growth in a growing market earns multiples 3–5× higher than an equivalent business in a flat market, for identical current-year numbers.
2. Margin profile and capital intensity
Software businesses trade at higher EBITDA multiples than retail because software margins are durable and capital requirements are low. A 25× EBITDA multiple on a SaaS business and an 8× multiple on specialty retail both reflect the underlying economics.
3. Risk and durability of earnings
Contractual recurring revenue justifies higher multiples. Highly variable project revenue justifies lower multiples. Subscription models earn 30–50% premiums to equivalent-revenue transactional businesses.
Public versus private multiples
The multiples Damodaran publishes are primarily derived from public-company comparables. These are not directly applicable to private SMEs for several reasons:
- Liquidity discount: Public shares can be sold in seconds; private business shares require months of process. Buyers demand a discount for this.
- Scale discount: Public companies are typically $100M+ in revenue; private SMEs might be 1/100th that size with correspondingly higher risk.
- Reporting quality: Public companies file audited statements; private SMEs typically don’t, introducing due-diligence risk.
- Management depth: Public companies have professional management layers; private SMEs are often owner-dependent.
The standard SME adjustment is a 20–40% discount to published public multiples, increasing with size. A business doing $500k revenue faces a 40–50% discount; one doing $8M faces 15–25%.
Our industry multiples database publishes SME-adjusted multiples, not public-market numbers. Apply them to your business and you get a realistic starting point. Apply public numbers and you’ll consistently overstate value by 30–50%.
Reference SME multiples (Q2 2026 data)
Selected industries with SME-adjusted multiples:
- Software / SaaS: ~6.2× revenue, ~22× EBITDA
- Software (on-premise): ~4.1× revenue, ~16× EBITDA
- Professional services: ~1.4× revenue, ~10.5× EBITDA
- IT services: ~1.8× revenue, ~11× EBITDA
- Healthcare services: ~2.3× revenue, ~13.5× EBITDA
- E-commerce / DTC: ~1.2× revenue, ~10× EBITDA
- Manufacturing: ~1.2× revenue, ~9.5× EBITDA
- Specialty retail: ~0.8× revenue, ~8× EBITDA
- Construction / trades: ~0.7× revenue, ~7× EBITDA
- Hospitality: ~2.1× revenue, ~9.5× EBITDA
- Biotech / pharma (small): ~4.8× revenue, ~18× EBITDA
- Marketing / creative agency: ~1.3× revenue, ~8.5× EBITDA
Full data for 25 industries is searchable in the industry multiples database.
Why two companies in the same industry trade at different multiples
Even within the same industry, individual businesses trade at multiples that differ by 50–100%. The adjustments come from business-specific factors:
- Size band: A $5M-revenue business earns a 15–25% premium over a $500k business in the same industry.
- Margin quality: An above-median EBITDA margin earns a 5–15% premium.
- Growth trajectory: Three years of growth earns a 15–30% premium over flat revenue.
- Recurring revenue share: 60%+ recurring revenue earns a 15–30% premium over transactional.
- Customer concentration: Top customer over 40% takes a 15–25% discount.
- Owner dependence: High owner dependence takes a 10–25% discount.
The result: two businesses in the same industry with the same revenue can legitimately trade at multiples of 0.8× and 2.5×. Neither is “wrong” – they reflect different underlying risk profiles.
Our quick valuation calculator applies these adjustments automatically based on business-specific inputs.
How to apply a multiple correctly
The right process:
- Pick the right industry. Match your business to the closest SIC-level category. For mixed-revenue businesses, use your primary revenue stream.
- Look up the SME-adjusted multiple. Not the public one.
- Apply the size adjustment. Multiply by 0.65 under $500k, 0.80 under $1.5M, 0.90 under $5M, 1.0 at $5–20M, 1.10 above $20M.
- Apply the quality adjustments. Margin, growth, recurring, concentration, owner dependence – each is a multiplier on the base multiple.
- Calculate a range, not a point. Apply the adjusted multiple at 85%, 100%, and 115% of central to get a realistic range.
The free Quick Valuation Calculator does exactly this, in your browser, in 30 seconds. The Standard report does it with working shown for every adjustment.
When multiples break down
Multiple-based valuation has real limits. It’s less useful when:
- The business is pre-profit. EBITDA multiple has nothing to work with. Revenue multiple applies but the growth premium dominates.
- The business is asset-heavy. Property, equipment, and inventory need direct valuation, not earnings multiples.
- The industry is in transition. Recent multiples may not reflect forward economics.
- The business has unusual characteristics. One large customer, regulatory dependency, or single-product concentration may require specific adjustments beyond industry defaults.
In those cases, DCF analysis typically adds more value than applying another multiple. Our Detailed report combines both approaches with explicit scenario modelling.