Kishen Patel
Kishen is the founder of Consult EFC and a strategic adviser to high-growth UK SMEs and mid-market firms. As an ICAEW Chartered Accountant and former Investment Banker, he applies elite-level financial rigour to help business owners optimise their valuation, navigate complex fundraising, and execute clean, high-value exits.
Table of Contents
If someone offers you “6x EBITDA” for your business, is that good, bad, or meaningless? The honest answer is that it depends, on your industry, your risk, your growth story, and how clean your numbers are.
This Consult EFC 2026 edition is a practical guide to EBITDA multiples for SME owners, founders, and finance leads who need a sensible starting point for fundraising, growth planning, or an exit. It also helps buyers sanity-check pricing before they spend time (and fees) on a deal.
A Business Valuations EBITDA Multiple is a shortcut, not a final answer. It can point you in the right direction fast, but it won’t replace proper diligence, deal terms, or cash flow reality. The goal here is simple: help you set expectations you can defend, and avoid the kind of valuation “surprise” that derails a raise or sale late in the process.
Free Valuation Strategy Audit
Is your SaaS or SME valuation truly defensible in today’s “Flight to Quality” market? Spend 30 minutes with Kish Patel (ICAEW Chartered Accountant) to pressure-test your financial model before pitching to UK VCs, Angel syndicates, or Private Equity.
Note: This is a 1-to-1 strategic session with a qualified Corporate Finance professional, specifically for UK-based founders.
EBITDA multiples in simple terms, and why buyers keep using them
EBITDA stands for earnings before interest, tax, depreciation, and amortisation. In plain English, it’s a quick view of operating profit before funding choices (debt vs equity) and non-cash accounting charges.
An EBITDA multiple is what buyers apply to that profit to estimate value. They use it because it’s quick, it’s comparable, and it often tracks how markets price risk and growth. If two businesses have similar economics, a multiple helps you compare them without getting lost in different capital structures.
It works best when:
- earnings are steady,
- costs are repeatable,
- the business has clear peers (comparable companies and deals),
- and the reported EBITDA turns into cash in a predictable way.
It misleads when:
- EBITDA is volatile,
- the business is loss-making (or “nearly profitable”),
- results are inflated by one-offs,
- or the company needs heavy ongoing spend (capex or working capital) to stand still.
The multiple is not random. It’s a compressed signal of three things buyers care about: risk, growth, and cash quality. Lower risk, higher growth, and strong cash conversion usually mean a higher multiple. The opposite pulls it down, even in “good” sectors.
The quick formula, what EV means, and where net debt fits
The headline formula is:
Enterprise value (EV) = EBITDA × multiple
EV is the value of the whole business operations, regardless of how it’s funded. That matters because a company with more debt is not automatically “cheaper”. The buyer still has to deal with the debt.
To get from EV to what shareholders might receive (equity value), you usually adjust for net debt:
Equity value = EV − net debt (plus or minus other deal adjustments)
Net debt is typically borrowings minus cash (with some debate about what cash is “surplus”). Most deals also include working capital adjustments, because buyers expect a normal level of stock, debtors, and creditors at completion.
A simple example helps. Say your EBITDA is £1.0m:
- At 4x, EV is £4.0m.
- At 6x, EV is £6.0m.
That extra 2 turns into £2.0m of EV. Now assume net debt is £1.5m:
- At 4x, equity value is about £2.5m.
- At 6x, equity value is about £4.5m.
This is why founders obsess over the multiple, but also why buyers obsess over “debt-like items” and working capital. Those adjustments can move the cheque by a painful amount.
EBITDA vs EBIT, and why add-backs can change everything
EBITDA isn’t the same as EBIT (earnings before interest and tax). EBIT includes depreciation and amortisation, which can be meaningful in asset-heavy businesses (plant, fleets, property). In those sectors, buyers often care more about EBIT or free cash flow, because the assets must be replaced.
Then there are add-backs. In most SME deals, the “EBITDA” used for the multiple is not your statutory EBITDA. It’s a normalised number that tries to reflect maintainable earnings.
Common add-backs include:
- owner salary normalisation (paying a market rate for the role),
- one-off legal or settlement costs,
- exceptional repairs,
- non-recurring consulting or recruitment fees,
- discontinued product lines or sites.
Add-backs can be fair, but they’re also where trust gets won or lost. Buyers challenge anything that looks like “we’ll take it out, but it might happen again”. Aggressive add-backs often backfire, because the buyer then assumes the rest of the numbers may also be optimistic.
Clean books tend to win better pricing. Not because buyers are generous, but because confidence reduces perceived risk, and risk is what drags the multiple down.
2026 industry benchmarks, who is trading high and who is staying low
Benchmarks help you sanity-check expectations, but they need context. The ranges below reflect broad public market EV/EBITDA patterns as of February 2026. Public companies usually trade on higher multiples than SME deals, for a few simple reasons: scale, liquidity (you can sell shares quickly), deeper management teams, and easier access to capital.
SME transaction multiples can sit materially below public averages, even in attractive sectors. That doesn’t mean SMEs are “worse”, it means the buyer takes more risk on concentration, people, systems, and repeatability. On the flip side, an SME with strong recurring revenue and proven churn control can narrow that gap.
A 2026 snapshot by broad sector, with realistic ranges you can sanity-check
Here’s a high-level view of average public market EV/EBITDA multiples by sector in early 2026:
| Sector (Broad) | Public EV/EBITDA (Feb 2026) | The SME Reality |
|---|---|---|
| Technology/IT | ~27x | SMEs often far lower unless recurring revenue and growth are proven. |
| Real Estate | ~21x | Strong assets help, but debt and interest rates remain critical. |
| Consumer Discretionary | ~17x | Wide spread; brand strength and margin control drive the upside. |
| Consumer Staples | ~17x | Stability supports multiples; growth is usually the main limiter. |
| Health Care | ~17x | Quality of Earnings (QoE) and regulation risk can swing pricing. |
| Industrials | ~17x | Order book visibility matters more than the sector average. |
| Materials | ~14x | Commodity price swings keep a lid on valuation multiples. |
| Utilities | ~13x | Stable cash flows, though debt sensitivity is a constant factor. |
| Energy | ~7x | Cyclicality and the energy transition keep pricing compressed. |
Free Valuation Strategy Audit
Is your SaaS or SME valuation truly defensible in today’s “Flight to Quality” market? Spend 30 minutes with Kish Patel (ICAEW Chartered Accountant) to pressure-test your financial model before pitching to UK VCs, Angel syndicates, or Private Equity.
Note: This is a 1-to-1 strategic session with a qualified Corporate Finance professional, specifically for UK-based founders.
Treat these as signposts, not targets. Subsector and company size can shift outcomes sharply. A vertical SaaS business and an IT services firm both sit in “tech”, but they do not trade the same way. The same goes for a premium consumer brand versus a small retailer that lives month to month.
What is pushing 2026 multiples up or down in different industries
Across 2026, the pattern is consistent: buyers pay up when they believe growth will continue, margins will hold, and cash will show up on time.
In technology, scalability remains the main driver. Subscription software and strong semiconductor demand have supported higher multiples, helped by AI investment and long-term compute needs. The catch is that tech is punished quickly when growth slows or retention weakens, because a high multiple assumes a lot about the future.
In industrials, resilience has been rewarded. Businesses linked to infrastructure, aerospace, defence, and industrial automation can hold stronger pricing when order books are visible. Industrial IoT and service revenue can also improve cash quality, which supports higher multiples than “build and ship” manufacturing alone.
Energy sits at the other end. Upstream businesses often trade around low single digits to mid-single digits on EV/EBITDA, because earnings can spike and drop with commodity prices, and because long-term transition pressure creates uncertainty. Integrated and downstream activities can be steadier, but capex demands still weigh on valuation.
Retail and consumer are split. Strong brands and efficient operators can reach healthy multiples, while smaller firms with thin margins and weak repeat purchase rates can fall into low multiples. The common thread is simple: predictability.
How to use this report to estimate your own multiple without fooling yourself
A good multiple estimate starts with honesty. Not brutal pessimism, and not wishful thinking. If you’re using benchmarks to plan a raise or exit, you need a range you can explain to an investor or buyer without crumbling under basic questions.
At Consult EFC, this is where the work usually lives: translating broad benchmarks into a valuation story that fits your size, your customers, your contracts, and the quality of your reporting. Multiples don’t land on your business by magic. They’re argued for, with evidence.
Start with the right peer set, then adjust for size, growth, and customer risk
First, choose a peer group that matches how you make money. “Tech” is not a model. “Recurring software revenue with low churn” is a model. “Project-based IT services with contractor dependency” is another.
Then adjust for the factors buyers price hardest in SMEs:
- Scale: smaller firms often trade lower because they’re harder to run, and harder to finance.
- Growth rate: strong growth helps, but only if it’s efficient (margin and cash don’t collapse).
- Customer concentration: one big client can cap the multiple, even with great EBITDA.
- Contract length and churn: longer commitments and low churn usually support higher pricing.
- Recurring revenue: predictable renewals reduce risk, and risk sets the multiple.
- Gross margin and delivery risk: strong margin with clear delivery processes tends to price better.
- People dependency: if results rely on one person, buyers discount for continuity risk.
A quick self-check helps: if your top three customers disappeared, what happens to EBITDA within six months? If the answer is “we’d be in trouble”, don’t expect a top-of-sector multiple until you reduce that risk.
The deal terms that can change value as much as the multiple
The multiple is the headline. The terms are the reality.
A “high multiple” deal can be worse than a lower multiple with clean cash at completion. Terms that commonly change what you actually receive include earn-outs, deferred consideration, working capital targets, and treatment of debt-like items (for example, unpaid taxes, leases, deferred revenue, or outstanding accruals).
Management retention also matters. If the buyer requires a long lock-in, restrictive conditions, or performance hurdles that are hard to control, you’re taking more risk after the sale. In that case, the headline multiple becomes less meaningful.
When you compare offers, focus on:
- cash at completion versus later,
- how EBITDA is defined for earn-out purposes,
- what “normal” working capital means and how it’s measured,
- and whether any liabilities are being treated like debt.
If you want a valuation you can plan around, you need to model the terms, not just quote the multiple.
What to do next if you are raising, buying, or planning an exit in 2026
If you’re raising in the next 12 to 24 months, your job is to turn valuation from a debate into a proof exercise. Build reporting discipline now, show how your EBITDA turns into cash, and make the drivers repeatable (pricing, retention, and delivery capacity).
If you’re considering a sale, start treating diligence like a product you’re preparing for launch. Buyers pay more when they don’t fear surprises. That means tidy management accounts, clear add-backs with evidence, and a credible forecast that matches past performance patterns.
If you’re a buyer or investor, use sector benchmarks as a filter, then focus on the risk that sits inside the EBITDA. Look for concentration, weak margin control, working capital traps, and add-backs that depend on hope.
Consult EFC can help you land on a fair range and present it clearly, whether you’re preparing for investment, buying a business, or setting an exit plan that won’t fall apart when scrutiny starts.
A 90-day plan to lift your multiple drivers (even before you grow revenue)
You can improve valuation drivers fast, without pretending revenue will double overnight.
- Tighten monthly reporting: close management accounts faster, reconcile key balances, and reduce “plug” entries.
- Document add-backs properly: keep invoices, contracts, and explanations ready, and be conservative.
- Show gross margin clearly: by product, service line, and customer type, with a simple bridge from revenue to gross profit.
- Reduce customer concentration: start with one practical move, such as a second buyer in the same sector, or a longer contract with the biggest client.
- Lock in repeat revenue: move suitable work onto retainers, maintenance plans, or longer-term contracts.
- Control working capital: set debtor targets, fix slow invoicing, and stop overbuying stock “just in case”.
- Track buyer-grade KPIs: churn, retention, sales pipeline quality, utilisation (if service-based), and cash conversion.
None of this is glamourous. It is what reduces perceived risk, and that’s what supports a better multiple.
How Consult EFC can help
EBITDA multiples in 2026 still vary widely by sector, but the bigger swing is business quality. Benchmarks are a starting point, and your outcome depends on earnings you can defend, cash you can prove, and risks you’ve already reduced.
If you want a valuation range that stands up in real conversations, focus on credible EBITDA, clear drivers, and reporting that holds together under pressure. Speak with Consult EFC to estimate a fair range and get deal-ready, whether you’re raising, buying, or planning an exit.
Free Valuation Strategy Audit
Is your SaaS or SME valuation truly defensible in today’s “Flight to Quality” market? Spend 30 minutes with Kish Patel (ICAEW Chartered Accountant) to pressure-test your financial model before pitching to UK VCs, Angel syndicates, or Private Equity.
Note: This is a 1-to-1 strategic session with a qualified Corporate Finance professional, specifically for UK-based founders.
