How UK business valuation multiples work
A guide to SDE and EBITDA, earnings quality, deal structure and the limits of comparing seller asking prices with completed sales.
Last updated October 2026. 6 min read.
How multiples work
Most UK businesses under £5m change hands on a multiple of adjusted net profit, sometimes called seller's discretionary earnings for owner-operated firms. You take sustainable annual earnings, add back the owner's salary and any one-off or personal costs, then apply a multiple that reflects risk, growth and how dependent the business is on its current owner.
The multiple is a shorthand for risk. A business with contracted recurring revenue and a management team in place earns a higher multiple than one where the founder holds every client relationship, even if both report the same profit. Buyers also weigh lease length, customer concentration, margin stability and how easy the business is to finance.
Turnover multiples are less common for small private companies unless the model is a marketplace, agency or early growth brand where profit is temporarily reinvested. Even then, serious buyers convert the conversation back to cash generation within a few years of ownership.
Indicative ranges by sector
The sector ranges shown on Dealdoor are configured model assumptions for an initial estimate. They are not bands calculated from a representative sample of completed UK SME sales. Two businesses in the same sector can have very different earnings, assets, liabilities, transferability and deal terms, so a range cannot set an asking price on its own.
- Restaurants and cafés: 1.5-3x adjusted profit, heavily influenced by lease length and licence
- Pubs and bars: 2-4x, freehold sites priced on property value plus goodwill
- Retail and convenience: 2-3.5x, with stock at valuation on top
- Ecommerce: 2.5-5x net profit, higher where traffic is owned and repeat purchase is strong
- SaaS and software: 3-6x profit, or a revenue multiple where recurring contracts dominate
- IT managed services: often 6-12x EBITDA when monthly recurring revenue is high
- Accountancy and bookkeeping: commonly 0.8-1.2x gross recurring fees, or an EBITDA multiple for larger firms
- Professional services: 2.5-4x, discounted where fee income follows one partner
- Recruitment: often around 1.5-2x net fee income for generalist agencies
- Healthcare and care: 4-7x for many clinics and domiciliary operators, higher for strong care homes
- Dental and veterinary: frequently among the highest SME bands where associate-led delivery is proven
- Manufacturing: 3-5x, plus separate valuation of plant and machinery
- Trades and field services: 3-5x adjusted profit where maintenance contracts exist
- Garage and MOT: typically 2-3.5x adjusted profit for well run sites
Use the band as a first bracket, then adjust for evidence. Contracts, staff depth and clean accounts move you up. Owner dependency, declining sales or messy records move you down.
What moves the number
Pushes the multiple up
- Recurring or contracted revenue with low churn
- A manager who runs the business day to day
- Clean, filed accounts that reconcile to bank statements
- Diversified customers, with no single account above about 20% of revenue
- A long lease or freehold on a site the business depends on
- Documented processes that a new owner can follow without tribal knowledge
Pulls the multiple down
- Owner holds the key relationships, licences or technical knowledge
- Declining revenue over the last two filed years
- Cash-heavy trading that cannot be evidenced
- Short lease with a break clause or an imminent rent review
- Concentrated supplier risk or platform dependency
- Thin management accounts and unexplained add-backs
Size also matters. Very small profits can support lower multiples because fixed diligence costs and buyer opportunity cost weigh more heavily. As maintainable profit rises into the mid six figures, the buyer pool and financing options usually improve.
Get the earnings definition right
Most pricing arguments start with a fuzzy profit number. Sellers often quote net profit after a low owner's salary. Buyers want maintainable earnings after a market-rate manager cost. Aligning that definition early prevents false confidence on both sides.
Common normalisations include adding back one-off legal fees, non-recurring repairs, personal expenses run through the company, and above-market owner salaries. Equally, buyers will deduct missing costs such as underpaid staff, deferred maintenance or marketing that was paused to inflate short-term profit.
If stock, freehold property or surplus cash sits in the deal, value those separately. Mixing property value into a goodwill multiple is one of the fastest ways to confuse a negotiation.
Sense checking an asking price
- Start from adjusted net profit, not turnover
- Apply the sector range above to get a first bracket
- Adjust up or down for the risk factors that actually apply
- Add stock, freehold property and any transferable assets separately
- Compare against live listings in the same sector and region
- Ask whether a lender would underwrite the cash flow at that price
If an asking price sits well above the bracket, ask the seller what justifies it. A good answer points at contracts, assets or growth you can verify. A weak answer usually means the price will move during negotiation.
For a fast first pass, use Dealdoor's free valuation calculator, then read the matching sector valuation page for the drivers that matter in your industry. Multiples are a map, not the destination. The right price is the one a funded buyer will complete on after diligence.
Using live market evidence
Dealdoor's asking-price snapshot is drawn from current public listings and labelled separately on the valuation page. It reports seller expectations, not completed transactions. Where price and profit are both disclosed, the ratio can help form questions, but it does not prove a business will sell at that multiple.
When you negotiate, anchor on maintainable earnings and risk, not on the seller's original brochure number. Bring comps, note the differences, and keep the conversation specific. That approach works whether you are buying or selling, and it keeps both parties closer to a completable price.
Revisit the bracket when new information arrives. A discovered key-person risk, a short lease or a major customer renewal can move the fair multiple by a full turn. Update your model instead of defending the first number you wrote on a notepad.
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