Frequently, owners of small businesses obsess about the multiple their company will fetch when sold. While the multiple is important – a business sold at 9 times EBITDA is worth 50 percent more than if sold at 6 times multiple – that focus can be misguided.
That’s because the multiple of EBITDA, defined as earnings before interest, taxes and deprecation, at which the business is sold is, quite frankly, out of their direct control. The market determines the multiple through the sale process orchestrated by the seller’s investment bank or financial advisor that ideally involves several potential buyers.
What is under the business owner’s control is EBITDA