Business sale multiples by sector: what the data says

Every owner wants a table of multiples by sector, and every honest table comes with a warning attached. Here is both.

First, why the published numbers disagree

If you search for UK business sale multiples you will find figures ranging from about 1.5 times to well above 10 times, apparently for similar businesses. They are not measuring the same thing.

Different size bands. The best known UK indices track deals in the private company market, and the deals they sample are substantially larger than the typical owner-managed business. Larger businesses attract higher multiples, consistently and for good reasons: professional management, audited accounts, less concentration and a deeper pool of buyers including private equity. A multiple observed on a fifteen million pound deal does not transfer to a four hundred thousand pound one.

Different earnings measures. Enterprise value to EBITDA is not the same as price to seller's discretionary earnings. SDE is a larger number because the owner's remuneration is added back, so the multiple applied to it is smaller. Comparing an SDE multiple with an EBITDA multiple is a category error and it happens constantly.

Asking prices against achieved prices. Marketing material sometimes reports what businesses were listed at. Achieved prices in the owner-managed market are private, which is precisely why this is hard.

Typical starting ranges, owner-managed businesses

These are the ranges used on our own valuation calculator, applied to adjusted profit. They describe small and lower mid-market UK businesses, not larger private company transactions, and they are a starting point for a conversation rather than a valuation.

| Sector group | Typical range | Basis | | --- | --- | --- | | Hospitality and food | 1.5 to 3.0 | Adjusted profit, leasehold | | Retail | 1.5 to 3.0 | Adjusted profit, stock usually in addition | | Motor and transport | 2.0 to 3.5 | Adjusted profit | | Leisure and other | 2.0 to 4.0 | Adjusted profit | | Services | 2.5 to 4.5 | Adjusted EBITDA, weighted to recurring revenue | | Trade and industrial | 2.5 to 4.5 | Adjusted EBITDA, plant valued separately | | Health and care | 3.0 to 6.0 | Adjusted EBITDA, subject to regulator rating |

Two things to notice about that table.

The first is that the ranges overlap heavily. Only health and care sits clearly above the rest, and it does so because of regulatory barriers to entry, demographic demand and the presence of consolidators who buy repeatedly.

The second is that the width of each range is roughly the same as the distance between sectors. A hospitality business at 3.0 is worth more, per pound of profit, than a services business at 2.5. Where you sit in your range matters more than which range you are in.

What decides where you sit

In rough order of impact for a small business.

Owner dependence

The largest single factor, and the one most owners underestimate. A business that runs without you is a different asset class from one that does not. It is the difference between buying earnings and buying a job.

A buyer assessing an owner-operated business is asking what happens when the relationships, the pricing judgement and the technical knowledge leave. If the answer is unclear, the multiple compresses towards the bottom of the range, and sometimes below it.

Revenue quality

Contracted and recurring beats repeat beats one off. A maintenance contract that renews annually with a 90 per cent retention rate is a materially better asset than the same profit earned from projects won one at a time, and the multiple reflects it.

This is the reason services businesses sit above retail and hospitality in the table. It is not that services are inherently better businesses. It is that more of their revenue can be contracted.

Customer concentration

One customer at 40 per cent of revenue reduces the multiple regardless of how long they have been there, because the buyer is pricing the chance that a relationship built with you does not survive the change of ownership.

Direction of travel

Three years of growth against three years of decline is worth more than most owners assume, and the effect is not symmetrical. Growth is rewarded modestly. Decline is punished heavily, because a buyer has to form a view on whether it continues.

Lease and premises

For leasehold businesses, a short unexpired term is a direct reduction. A buyer with four years of security cannot justify a significant fit out and cannot be confident of recovering their investment.

Records and evidence

Clean, reconciled management accounts do not raise a multiple on their own. Poor records reliably lower it, because everything unverifiable is treated as a risk and risk is what the multiple prices.

Two sectors worth explaining

Hospitality and food. Low multiples despite often being profitable and despite the trade attracting a lot of buyers. The reasons are structural: leasehold tenure, thin margins, a high rate of business failure, heavy dependence on a specific site and frequently on a specific operator, and equipment that depreciates rather than appreciating. The freehold, where there is one, carries the value and is added separately.

Health and care. Higher multiples because of genuine barriers to entry: registration, inspection regimes, and demand that does not follow the economic cycle. The rating attached to the service is part of the valuation rather than a side issue, and a downgraded rating can reduce a business's value very quickly.

How to use a range properly

Take the range for your sector. Then be honest about six things: whether the business runs without you, how much revenue is contracted, what your largest customer represents, whether revenue is growing, how long the lease has, and whether your management accounts would survive a stranger's scrutiny.

Score well on most and you are arguing for the upper half. Score poorly on most and the lower end is the realistic conversation, whatever the table says.

And a note on what we have not given you

We have not given you an average, a headline figure, or a claim about what businesses "typically" achieve, because we do not have data that would support one. Attainer is new, the transactions on it are not numerous enough to be evidence of anything, and a number invented to look authoritative would be worth less than nothing to somebody making a decision about their own business.

When there is a dataset here large enough to say something real about achieved prices, we will publish it, and say what it is based on.