What EBITDA Multiple Should I Expect for My Small Business?
Canadian small businesses with EBITDA between $500K and $5M typically trade at 3–6 times EBITDA, with the multiple driven primarily by vertical, owner-dependency, and revenue growth rate.
Why EBITDA multiples vary
The multiple a buyer pays is not a fixed number attached to a size band. It reflects how a buyer prices risk. A business that generates $1M in EBITDA but depends entirely on one owner-relationship to retain its clients will trade at a lower multiple than one with recurring contracts, a management team in place, and diversified revenue.
Three factors consistently drive variance in the Canadian small-business market:
Vertical. Technology and software businesses commonly command multiples at the top of the range — sometimes above 6× — because of their recurring revenue characteristics and scalability. Service businesses where the owner is the main service-delivery mechanism commonly sit at 3–4×. Manufacturing and distribution businesses typically land in the middle of the range, adjusted for capital intensity and customer concentration.
Revenue predictability. Businesses with contracted or subscription-based revenue trade at a premium over those with transactional, project-based, or lumpy revenue. A buyer pricing a business with 80% recurring revenue is pricing less uncertainty — and that translates directly into a higher multiple.
Owner-dependency. If the business's key relationships, institutional knowledge, or operational capabilities reside in the owner personally, a buyer will discount the multiple to reflect the transition risk. Reducing owner-dependency before going to market — building a management team, documenting processes, transitioning key client relationships — typically increases the achievable multiple more than any other pre-sale action.
The size discount
Businesses with EBITDA below $500K typically trade at lower multiples than those in the $1M–$5M band — sometimes as low as 2–3× — because the buyer pool is smaller (fewer institutional buyers participate), financing is more difficult to arrange, and the absolute dollar value of the deal does not justify the same level of professional diligence and transaction costs.
Above $5M in EBITDA, the buyer pool expands significantly to include private equity and larger strategic acquirers. This increased competition among buyers typically pushes multiples higher, often into the 5–8× range for quality businesses, though the factors above still apply.
What this means for your preparation
If your business currently generates $800K in EBITDA and is valued at 4× ($3.2M), improving EBITDA to $1M through margin improvement while reducing owner-dependency could realistically move the multiple to 4.5× — producing a $4.5M value, a $1.3M increase driven by both higher earnings and a higher multiple applied to them. Valuation advisors commonly call this the "multiple expansion" effect of quality improvement, and it is one of the primary reasons a structured pre-sale preparation process adds value.
Transaction databases suggest that the gap between what sellers expect and what buyers will pay is widest at the lower end of the market, where seller pricing often reflects asset replacement cost or years-of-profit thinking rather than a market multiple applied to normalized earnings.