Small Business Valuation Multiples by Industry (SDE and EBITDA, 2026)

Businesses with equipment, steady repeat customers and light staffing sit at the top. Owner-run service shops and restaurants, where the business leans on one person, cluster near the bottom.

Revenue multiples reward high margins and recurring income, which is why software and insurance agencies lead. Restaurants at 0.37x show how thin food margins pull this measure down.

The multiple climbs with every size bracket. Note the switch from SDE to EBITDA at $2M, so the jump between those two bars is partly a change in what is being measured.

Pricing for $5M to $50M companies has risen each year shown, from 4.8x in Q2 2023 to 5.8x in Q2 2026. Sellers in that range are getting paid more for the same earnings.

Small business sale metrics by industry, full-year 2025 (selected subsectors, sorted by cash flow multiple)

Source: BizBuySell (CoStar Group), BizBuySell Insight Report Data Tables: Closed Small Business Transaction Metrics by Sector for the Full-Year 2025. Download as image

Valuation multiples by purchase price, Q2 2023 to Q2 2026 (SDE under $2M, EBITDA $2M to $50M)

Source: International Business Brokers Association (IBBA) and M&A Source, Market Pulse Q2 2026 Highlights. Download as image

For comparison: US public company EV/EBITDA by industry, January 2026 (positive-EBITDA firms)

Source: Aswath Damodaran, NYU Stern School of Business, Enterprise Value Multiples by Sector (US). Download as image

What is a good SDE multiple for a small business?

For most Main Street deals, a fair multiple sits close to the market average. In 2025 that was 2.61x cash flow across 9,586 closed sales. In Q3 2026 the median business sold for $350,000, on median cash flow of $156,000.

Size shifts the answer fast. In Q3 2026, businesses selling above $1 million averaged 3.73x cash flow, while those below averaged 2.30x. The broker survey tells the same story: deals under $500K went for 2x SDE in Q2 2026, and $1M to $2M deals went for 3.1x.

So a "good" multiple depends on who you are. If you are a seller with a small, owner-run shop, a bid near the bottom of the range may be normal, not an insult. If you are a buyer, a seller asking a top-tier multiple for a small, owner-dependent business needs to show you why.

Why do car washes and laundromats sell for more than restaurants?

Buyers pay for earnings they believe will keep coming after the seller walks away. Car washes averaged 4.73x cash flow in 2025 and laundromats 4.12x. Both run on equipment, repeat local customers and small staffs. A new owner can step in without rebuilding the customer base.

Restaurants averaged 2.26x in 2025 and coffee shops 2.28x. Hair salons and barber shops came in at 2.18x. These businesses depend on the owner, a chef or a few stylists, and customers can follow those people out the door. Margins are thin, leases matter a lot, and failure risk is real. Buyers price that in.

Service trades land in the middle. HVAC businesses averaged 2.80x, auto repair shops 2.70x and plumbing businesses 2.62x. They have steady demand and trained crews, but the owner often holds the key customer relationships and the licenses, so a smooth handover is worth real money to a buyer.

Look at the deal counts too. Restaurants had 1,774 reported sales, so that average is solid. Car washes had 32 and dental practices 22, so a handful of unusual deals can move those numbers. Treat small-sample industries as a rough guide.

SDE vs EBITDA: which multiple applies to your deal?

SDE, or seller's discretionary earnings, is profit before taxes, interest, depreciation and amortization, with one owner's salary and perks added back. It assumes the buyer will run the place. Most businesses under about $2M are priced this way, and broker listings usually call it "cash flow."

EBITDA assumes the owner is replaced by a paid manager, so a market salary comes out before the multiple is applied. That is part of why EBITDA multiples look higher: the earnings figure is smaller. Bigger, less owner-dependent companies also carry less risk. In Q2 2026, $2M to $5M deals sold for 4x EBITDA and $5M to $50M deals for 5.8x.

Here is how the switch plays out. Picture an owner who pays himself nothing on paper and works long weeks. His SDE looks healthy. Hire a general manager to replace him and the EBITDA is far lower. Same business, same price, two very different-looking multiples.

Never apply an EBITDA multiple to SDE, or the reverse. Sellers sometimes quote a bigger-company EBITDA multiple against owner-inclusive SDE. That one mix-up can inflate a price by a wide margin.

How to estimate what a business is worth

• Rebuild the earnings. Start with tax returns, not the listing sheet. Add back only real one-time costs and the owner's own pay and perks. Question every add-back you cannot trace to a document.
• Pick the right basis. Use SDE for an owner-operated business and EBITDA for one with a manager in place.
• Find the industry range. Compare the cash flow and revenue multiples for your sector in the table above, and check both. A business that looks cheap on cash flow but expensive on revenue may have earnings that are unusually high this year.
• Adjust for risk. Move down for customer concentration, a short lease, owner dependence or falling sales. Move up for recurring contracts, documented systems and staff who will stay.
• Test it against financing. If an SBA lender or seller note cannot be repaid from the cash flow, the price is too high no matter what the multiple says.
• Read the deal terms, not just the headline. Earnouts, seller notes, working capital targets and holdbacks can make two offers at the same multiple worth very different amounts.

Why do small businesses sell for so much less than public companies?

In January 2026, public US companies outside finance traded at 16.95 times EBITDA on average. Public restaurant chains sat at 17.49 and software companies at 24.48. A local restaurant, by comparison, sold for 2.26x cash flow in 2025.

The gap is about risk and liquidity. A public chain has hundreds of locations, professional management and shares you can sell in seconds. A single shop has one owner, one lease and no ready market for its stock. Buyers also usually have to borrow and personally guarantee the loan. Use public multiples only as a ceiling for context, never as a pricing benchmark for a Main Street sale.

What these numbers mean for buyers and sellers right now

Multiples have mostly held or risen. The average cash flow multiple ticked up in 2025, though deals under $500K slipped from 2.3x SDE in Q2 2025 to 2x in Q2 2026. Meanwhile, the $5M to $50M segment climbed from 5.5x in Q2 2025 to 5.8x in Q2 2026. For larger sellers, that is a decent market.

For smaller sellers, the best way to raise your price is to make the business less dependent on you. Write down your processes, train a second-in-command, lock in a longer lease and move customers onto contracts. For buyers, spend more time on the earnings and the contract than on the multiple. A fair multiple on inflated earnings is still an overpay.

If you are an employee or manager being offered a stake, or a key worker in a business up for sale, these figures help too. They tell you roughly what the owner expects to collect, and why a buyer may ask you to sign a retention deal or a non-compete before closing.

Sources and method

Every number on this page comes from the sources below, each opened and read on or before October 17, 2026. A second, independent review checked every figure against its source and corrected anything that did not match. Figures that could not be confirmed were left out.

1. BizBuySell (CoStar Group), BizBuySell Insight Report Data Tables: Closed Small Business Transaction Metrics by Sector for the Full-Year 2025 (Full-year 2025 data, shown with the Q3 2026 Insight Report)
2. BizBuySell (CoStar Group), BizBuySell Insight Report, Q3 2026 (Q3 2026)
3. BizBuySell (CoStar Group), 2025 Year in Review: BizBuySell Market Recap (January 30, 2026)
4. International Business Brokers Association (IBBA) and M&A Source, Market Pulse Q2 2026 Highlights (Q2 2026 edition (August 2026))
5. IBBA and M&A Source via PR Newswire, The Market Pulse Survey Q2 2026 Reports the Latest Trends in Business Sales up to $50M (August 25, 2026)
6. Aswath Damodaran, NYU Stern School of Business, Enterprise Value Multiples by Sector (US) (January 2026)