EBITDA — Earnings Before Interest, Tax, Depreciation and Amortisation — is the most widely used metric in UK SME valuation. It strips out financing and accounting choices to focus on the underlying operating performance of the business.
Established, profitable businesses with three or more years of consistent earnings. Particularly common in manufacturing, services, and trading businesses being sold to trade or PE.
— How it works
Step by step
01
Calculate adjusted EBITDA
Start with operating profit, add back depreciation, amortisation, and any one-off or non-recurring items (normalisation).
02
Identify the appropriate multiple
Use evidence from comparable transactions in your sector and size band — not generic ranges from the internet.
03
Apply premiums and discounts
Adjust for size, growth, customer concentration, recurring revenue, and management depth.
04
Cross-check with other methods
Triangulate against DCF and asset-based approaches to confirm the result is defensible.
— Strengths
Simple to communicate and benchmark
Widely understood by buyers and lenders
Clear focus on operating performance
Easy to model improvements against
— Limitations
Ignores capital intensity differences
Sensitive to normalisation assumptions
Can flatter loss-making businesses
Multiples vary widely between transactions
— Our insight
"The single largest driver of EBITDA multiple expansion is reducing perceived risk — diversified customers, recurring revenue, and a management team that runs the business without the owner."
Take the next step
Find out what your business could be worth before buyers do.
If you are considering a sale now or in the next few years, a confidential valuation call can help you understand where you stand, what buyers may look for, and what could improve your outcome.
