Every industry trades in a range
Ask a founder what the business is worth and the answer usually starts with a multiple. A competitor sold for a certain number times earnings, a friend mentioned a figure at dinner, or an industry newsletter quoted the going rate. The founder applies that number to their own earnings and treats the result as the value of the company.
The trouble is that there is no single going rate. Every sector trades within a band of EBITDA multiples. Businesses at the bottom of the band are small, owner-dependent, and concentrated. Businesses at the top are larger, systematized, diversified, and growing. The band itself is public knowledge. What most founders do not know is which end of it they are at, or why.
The FNDRS Playbook draws that band with illustrative numbers: a typical lower-middle-market range from about 4.5x to about 7.5x adjusted EBITDA, with a fourth marker beyond it for businesses that buyers place in a better category altogether.
| Where it lands | Multiple | What buyers see |
|---|---|---|
| Low | About 4.5x | Owner-dependent. Concentrated. Unaudited. Under $2M of EBITDA. |
| Mid | About 6.0x | Second-tier management. Some recurring revenue. Clean books. |
| High | About 7.5x and up | Management runs it. Diversified. Recurring. Documented. Growing. |
| Beyond the range | About 9x and up | Re-categorized: technology-enabled, platform, or scarce asset. |
Illustrative. Ranges vary by sector, size, and cycle.
A founder who assumes the middle of the range, or the top of it, is making an assumption a buyer will not share. The buyer places the business wherever the evidence puts it. That is the 4.5x problem. The problem is not that the bottom of the range exists. It is that founders discover they are in it during diligence, when it is too late to change anything.
Why businesses land at the bottom
A multiple is not a number buyers look up. It is a judgment they reach about the business: how large it is, how fast it is growing, and above all how risky its future cash flows are. A low multiple is a buyer's way of pricing risk it cannot remove.
In founder-led businesses, that risk tends to come from the same few places.
- The owner is the business. The founder holds the key relationships, sets the prices, makes the hires, and may hold the license. A buyer is not buying the founder. It is buying what continues after the founder leaves, and here that is uncertain.
- Revenue is concentrated. One or two customers account for a large share of sales, so losing either one would change the business overnight.
- The numbers have not been tested. The books are kept on a cash basis, personal expenses run through the company, and nobody outside the business has reviewed the statements. A buyer has to assume the earnings are lower than they look until someone proves otherwise.
- The business is small. Smaller deals attract fewer buyers and fewer lenders, and a smaller business has usually not yet solved the problems a larger one has.
None of these is unusual, and many founder-led businesses carry more than one. The point is that each gives a buyer a reason to offer less, and a buyer who can point to three of them will price at the bottom of the range with the evidence to defend it.
Three things that move a business up
When a business moves from the bottom of the range toward the top, it is because the buyer's questions about risk have been answered with evidence. Three kinds of evidence do most of the work.
A business that runs without you
Owner dependency is the largest single discount in many founder-led businesses, and buyers price it with a lower multiple, a longer earn-out, or both. A capable second in command, managers who run their own functions, and customer relationships held by the team rather than the founder each remove a reason to discount. The question buyers ask is blunt: what happens to revenue if you are gone for ninety days?
Revenue a buyer can count on
Buyers pay more for revenue they can see coming. Contracted or recurring revenue, and a customer base where no single customer matters too much, both lower the risk that next year looks different from last year. Growth that is documented and explainable does the same work.
Numbers that hold
Every adjusted EBITDA figure will be rebuilt by the buyer's accountants. Accrual books, statements reviewed by an outside accountant, revenue that ties to the bank, and an add-back list with a document behind every line mean the number survives that rebuilding. When it does, the buyer's confidence in everything else rises with it.
And size, which proves the rest
Buyers also pay more per dollar of earnings for larger companies. Part of that is financing: larger deals attract more lenders and more buyers. Part is risk: a business with $10M of EBITDA has usually already solved the problems a business with $2M has not. The playbook's size staircase shows the pattern with illustrative numbers.
| Adjusted EBITDA | Typical EBITDA multiple |
|---|---|
| $1M to $2M | 5.0x |
| $2M to $5M | 6.0x |
| $5M to $10M | 7.0x |
| $10M and up | 8.5x |
Illustrative gradient. Actual multiples vary by sector, cycle, and buyer type.
Size is not something most founders can change quickly. But it explains why buyers treat a larger business as a safer one, and why a combination with another business before a sale can move a founder up more than one step at once.
What the range is worth on $3M of earnings
Put the range in dollars and the cost of the assumption becomes plain. Take an illustrative business with $3M of adjusted EBITDA and place it at three points on the illustrative band.
| Where it lands | Multiple | Enterprise value |
|---|---|---|
| Low | 4.5x | $13,500,000 |
| Mid | 6.0x | $18,000,000 |
| High | 7.5x | $22,500,000 |
Illustrative. Enterprise value here is adjusted EBITDA times the multiple, before debt, fees, structure, and tax.
The same earnings, in the same industry, produce headline values $9,000,000 apart between the bottom and the top of the illustrative range. That gap is the price of evidence. A founder who assumed the middle of the range and lands at the bottom has not lost a negotiation. The difference was lost before the negotiation began.
Two cautions about the table. First, these are headline numbers. What a founder keeps depends on debt, fees, working capital, the structure of the deal, and tax, and two offers with the same headline can leave very different amounts in the founder's account. Second, the multiple and the earnings tend to move together. The same weaknesses that push a business to the bottom of the range often shrink the adjusted EBITDA a buyer will accept, so the real gap can be wider than the table shows.
What to do eighteen months out
Buyers do not price a business on its plans. They price it on its trailing numbers, usually the last twelve months. The work that moves a business up the range has to be finished early enough to show up in those numbers, which is why the decisions that set the price are made long before the sale. Climbing a rung is not a rebrand. It is eighteen months of evidence.
For a founder who wants a sale in about eighteen months, that suggests an order of work.
- Find out where you are. Rebuild your adjusted EBITDA the way a buyer would, with every add-back tested, and place the business honestly in its range. Until someone does this work, most founders do not know which end of the range they are at.
- Clean up the books. Move to accrual accounting, have the statements reviewed by an outside accountant, take personal expenses out of the business, and document every add-back you intend to claim.
- Make the business transferable. Put licenses, leases, and key contracts in a form that can move to a buyer, and make sure the important customer relationships sit with the team, not only with you.
- Work on the biggest risk first. If one customer is a large share of revenue, or the business stalls when you step away, that is the issue to work on, because it is the one a buyer will price.
- Settle the story about a year out. Decide which category the business belongs in and where it sits in the range, then fix or frame what a buyer would find, so the process starts from evidence rather than hope.
None of this promises a place at the top of the range. What it does is replace the buyer's assumptions with evidence, and evidence is what a buyer prices.
The founders who get premium outcomes are rarely the best negotiators. They are the best prepared.