Asking multiple
An asking multiple is the asking price expressed as a multiple of annual earnings — usually SDE for owner-operated businesses and EBITDA for larger ones. A business listed at $900,000 with $300,000 in SDE carries an asking multiple of 3.0×.
A multiple is shorthand for risk. Two businesses earning the same amount can trade at very different multiples, and the gap is almost entirely explained by how confident a buyer is that those earnings continue after the current owner leaves.
What pushes a multiple up
- Recurring or contracted revenue rather than one-off work
- A management layer and documented processes, so the business is not the owner
- Customers spread widely rather than concentrated in a few accounts
- Clean, reviewed financial statements a lender can underwrite quickly
- Assets a lender will finance, which widens the pool of buyers who can actually close
Asking is not selling
An asking multiple is the seller’s opening position. What a business actually sells for is only known at closing, and the two can differ substantially — particularly where an asking price was set without a valuation, or where diligence removes add-backs the price assumed.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentSelling a business
- 02Business Development Bank of CanadaIndustryHow to sell your business
- 03Treadstone LawLegal commentaryGetting a Business Valuation Before You List
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