Why Some Businesses Sell for Much More Money

Ever wondered why some businesses sell for much more money than other? Or why some businesses never sell at all? Take this example:

Two businesses in the same sector. Both £850k EBITDA. Similar size and market position.

One sells for £2.55 million (3x EBITDA). The other sells for £4.25 million (5x EBITDA).

Difference: £1.7 million.

What explains it?

Where they sit within their sector’s multiple range. And most business owners don’t understand how this works.

This week, you’re learning how to determine your realistic multiple range—the “C” in F.A.C.E.

What Sector Multiples Actually Mean When Businesses Sell

According to Forbes Burton’s January 2025 guide to UK business valuations, typical multiples vary by sector:

• Stable service businesses: 3-5x EBITDA
• Growing technology/SaaS: 5-8x EBITDA
• Manufacturing: 4-6x EBITDA
• Retail/hospitality: 2-4x EBITDA
• Professional services: 3-6x EBITDA

But notice: these are ranges, not fixed numbers.

The question isn’t “what’s my sector multiple?”

The question is “where do I sit within my sector’s range?”

The Eight Factors That Determine Your Position

Factor 1: Revenue Size

Within every sector, larger businesses command higher multiples.

According to Wise’s 2025 UK business valuation data:

• Owner-managed businesses: 0 to 2.5x EBITDA
• Small businesses (profits to £500K): 2 to 7x EBITDA
• Small businesses (profits over £500K): 3 to 10x EBITDA

Size creates multiple expansion because larger businesses typically have:

• More robust management teams
• Better systems and processes
• Greater customer diversification
• Stronger market position
• More attractive to buyers (larger buyer pool)

Your Assessment:

Annual revenue:

• Under £2m: Lower end of sector range
• £2-5m: Mid range
• £5-10m: Upper-mid range
• Over £10m: Upper end of sector range

Example:

Your business: £3.2m revenue in stable service sector (3-5x range)

Size position: Mid range (suggests 4x base, before other factors)

Factor 2: Growth Trajectory

Buyers pay premium for consistent, predictable growth.

Your Three-Year Revenue:

• First year: £2.6m
• 2nd year: £2.9m
• 3rd year: £3.2m

Growth rate: 11.5% Year 1-2, 10.3% Year 2-3

Assessment:

• Declining revenue: -0.5x to -1.0x
• Flat (0-3% growth): -0.2x to -0.3x
• Modest growth (3-10%): No adjustment
• Strong growth (10-20%): +0.3x to +0.5x
• Exceptional growth (20%+): +0.5x to +1.0x

Your Position:

Consistent 10-11% growth: +0.4x adjustment

Factor 3: Profitability Margins

Higher margins command higher multiples because they demonstrate:

• Competitive advantage
• Pricing power
• Operational efficiency
• Defensibility

Your Calculation:

EBITDA margin = EBITDA ÷ Revenue £850k ÷ £3.2m = 26.6%

Sector Context:

Research your sector’s typical margins:

• Below sector average: -0.3x to -0.5x
• At sector average: No adjustment
• Above sector average: +0.3x to +0.5x
• Significantly above: +0.5x to +1.0x

Example:

Your sector average margin: 18-22% Your margin: 26.6%

Assessment: Significantly above sector = +0.6x adjustment

Factor 4: Recurring Revenue Model

Subscription and recurring revenue models command premium multiples.

Assessment:

• 100% project-based revenue: No adjustment
• Some recurring (10-30%): +0.2x
• Significant recurring (30-60%): +0.5x
• Majority recurring (60-80%): +0.8x
• Subscription model (80%+): +1.0x to +2.0x

Example:

Your business: 25% of revenue is retainer/recurring

Assessment: +0.2x adjustment

Factor 5: Market Position

Your competitive position affects multiple significantly.

Assessment Framework:

Market Leader (Top 3 in region/niche):

• Recognised brand
• Price setter, not taker
• Customers seek you out Adjustment: +0.5x to +0.8x

Established Player (Top 10):

• Known in market
• Competitive pricing
• Mix of inbound and outbound Adjustment: +0.2x to +0.3x

Commodity Provider:

• Price-driven competition
• Little differentiation
• Heavy sales effort required Adjustment: -0.3x to -0.5x

Your Position:

Well-regarded in your region, not market leader but established.

Assessment: +0.3x adjustment

Factor 6: Customer Type and Quality

Who you sell to affects risk perception.

B2B vs B2C:

• Pure B2C: Typically lower multiples (higher churn risk)
• Pure B2B: Typically higher multiples (stickier relationships)
• B2B2C: Depends on model

Customer Quality:

• SME customers with low switching costs: No adjustment
• Mid-market with established relationships: +0.2x
• Enterprise customers with integration: +0.4x
• Government/public sector contracts: +0.3x (if renewable)

Your Assessment:

B2B serving mid-market, average customer tenure 4+ years

Assessment: +0.2x adjustment

Factor 7: Geographic Reach

Assessment:

• Single location, local market only: -0.2x
• Regional presence (multiple locations): No adjustment
• National presence: +0.2x to +0.4x
• International: +0.4x to +0.8x (if profitable)

Your Position:

Three regional locations, serve nationwide customers

Assessment: +0.3x adjustment

Factor 8: Industry Tailwinds/Headwinds

Current market conditions affect valuations dramatically.

According to St. James’s Place’s analysis:

“The SME market in the UK in 2025 will likely face a complex and evolving legal environment.”

Assessment:

• Industry in decline: -0.5x to -1.0x
• Industry facing regulatory headwinds: -0.3x to -0.5x
• Stable mature industry: No adjustment
• Industry with growth tailwinds: +0.3x to +0.5x
• Hot sector with strong M&A activity: +0.5x to +1.5x

Your Position:

Stable industry, slight regulatory complexity, modest growth outlook

Assessment: -0.1x adjustment (slight headwind)

Putting It All Together

Your Sector Base Range: 3-5x EBITDA

Your Starting Point (based on size): 4x

Adjustments:

Factor	Impact
Growth trajectory (10-11%)	+0.4x
Profitability margin (26.6%)	+0.6x
Recurring revenue (25%)	+0.2x
Market position (established)	+0.3x
Customer quality (mid-market B2B)	+0.2x
Geographic reach (national)	+0.3x
Industry conditions (slight headwind)	-0.1x

Total Adjustments: +1.9x

Your Adjusted Base Multiple: 4.0x + 1.9x = 5.9x

But remember Week 2: you have risk factors to account for.

Your Risk Adjustments (from Week 2):

• Owner dependency: -1.0x
• Customer concentration: -0.8x
• Systems documentation: -0.3x
• Management team: -1.1x
• Financial reporting: -0.3x

Total Risk Discount: -3.5x

Your Realistic Multiple: 5.9x – 3.5x = 2.4x

How to Research What Businesses Sell for in Your Sector

Don’t just accept generic sector ranges. Research your specific market.

Sources to Check:

1. Industry Transaction Databases

BizBuySell, BusinessesForSale.com (these focus on smaller businesses) —look at completed sales in your sector

Filter by:

• Size (similar revenue/EBITDA to yours)
• Geography (UK only)
• Date (last 12-24 months)

Calculate multiples from listed sales.

2. Industry Reports

Search for:

• “UK [your sector] M&A report”
• “[Your sector] valuation multiples UK”
• Industry association M&A data

Look for median and range of multiples.

3. Professional Advisors

Corporate finance advisors track sector multiples actively.

Many publish quarterly M&A reports showing recent deal multiples by sector.

4. Public Company Comparables

While your business isn’t public, look at public company multiples in your sector.

Private businesses typically trade at 20-40% discount to public company multiples (liquidity discount).

Example:

Public companies in your sector: 7-9x EBITDA Private company discount: 30%

Implied private multiple range: 4.9-6.3x

Your Week 3 Action Plan

This week, determine your realistic sector multiple range.

Monday (3 hours): Research your sector. Gather data on recent transactions, industry reports, public company multiples.

Tuesday (2 hours): Assess your position on the eight factors. Be honest—not optimistic, not pessimistic. Realistic.

Wednesday (2 hours): Calculate your base multiple based on size within sector range.

Thursday (1 hour): Add up adjustments from the eight factors. What’s your adjusted base multiple?

Friday (1 hour): Apply your risk adjustments from Week 2. What’s your realistic multiple?

Weekend: Sense-check your number. Does it feel right? Too high? Too low? What would you need to change to improve it?

What You’ll Have by Next Week

By next Wednesday, you’ll have:

• Normalised EBITDA (Week 1): £850k
• Risk assessment and discount (Week 2): -3.5x
• Sector positioning and base multiple (Week 3): 5.9x before risks
• Realistic multiple after risks: 2.4x

Next week—Week 4—we combine everything into your complete Exit Value Report with three-number range (low/mid/high) and build your 12-month action plan.

You’re three-quarters through the F.A.C.E. process.

Block the time this week. Do the sector research. Know your position.

Is your business saleable and exit ready for you to leave it (no matter when it happens)? Click to to get Christine’s free Exit Ready Checklist the expert in making sure your business is saleable for more money and on better terms.   Christine helps you get out of the day-to-day, guides you through the handover of controls and gets you and your businesses exit ready so you can enjoy a happier, richer future.  She saves you THOUSANDS so you can increase the value of your businesses by MILLIONS.