How do calculate EBITDA multiple to value of the company?


3 Answer(s)


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• The market sets the price multiple, and the only true way of determining the market value of your company is to package and present your business for sale. Only real bids from the most qualified buyers will give you the true answer for what the market would pay.
• Typically, for companies with EBITDA between $1 million and $20 million, the market will pay multiples between 3.5 to 7 times EBITDA.
• The multiple changes from industry to industry.
• The larger the company, the higher the EBITDA multiple. This is due to larger companies being less vulnerable and having more consistent, predictable revenue and profit streams. Also, the supply of larger companies is smaller, so demand is higher.

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To calculate EBITDA 1) Look at your Company's Income statement. 2) Subtract your expenses ( except for Interest and Taxes) from your income or revenue.( this will equal EBIT.) 3) Find any line item for Depreciation. 4) Find any line item for Amortization.5) Set up the following formula : EBIT + depreciation + amortization = EBITDA.

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Extending what John said: Also go through the module of Comparable Acquisition Analysis, Comparable Trading Analysis.

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