What is a good SDE multiple?
A multiple is a risk score in disguise. The number is only 'good' relative to the size, durability and transferability of the earnings behind it.
Direct answer: Most owner-operated small businesses trade between 2.0x and 4.0x SDE. Under $250,000 of SDE, 1.5x–2.5x is typical; $250,000–$500,000 usually trades at 2.5x–3.5x; above $1 million, 3.5x–5.0x or an EBITDA-based multiple is common.
Typical ranges by earnings size
| Annual SDE | Common multiple | Why |
|---|---|---|
| Under $100k | 1.0x – 2.0x | Essentially buying a job; earnings are fragile |
| $100k – $250k | 1.5x – 2.5x | Heavy owner dependence, small buyer pool with cash |
| $250k – $500k | 2.5x – 3.5x | Some staff and systems, financeable by acquisition lenders |
| $500k – $1M | 3.0x – 4.0x | Management depth, broader buyer competition |
| Over $1M | 3.5x – 5.0x+ | Institutional buyers enter; deals often shift to EBITDA |
These are directional ranges from broker market data, not a quote for your deal. Verified comparable sales in the same industry and region always beat a general table.
What pushes a multiple up
- Recurring or contracted revenue instead of one-off jobs
- No customer above roughly 10% of revenue
- A manager who runs operations without the owner
- Three years of growing, documented, tax-return-verified earnings
- A long, assignable lease and transferable licenses
- Clean books, documented processes, low staff turnover
What pulls a multiple down
- The owner is the salesperson, the technician and the relationship
- One customer at 30%+ of revenue
- Declining revenue, or a spike that cannot be explained
- Add-backs that cannot be traced to documents
- Deferred capital expenditure or aging equipment
- Regulatory, platform or single-supplier dependence
The multiple must survive the loan
Even a fair multiple is the wrong price if the debt does not work. With 20% down over 10 years, roughly 2.5x–3.0x SDE is where most acquisition loans keep debt service coverage above 1.25x once you pay yourself a market salary. Above 4x, deals usually need more equity, a seller note, or an earnout.
Check the multiple a listing is actually asking
Enter the asking price and earnings in the AcquireAI deal calculator to see the implied multiple, the financed payment, coverage ratio and payback period side by side.
Frequently asked questions
Is a 3x SDE multiple good?
3x is a fair market price for a stable business earning $250,000–$750,000 with some staff and diversified customers. For a micro business with one owner doing all the work, 3x is expensive.
Why do brokers list at higher multiples?
Asking prices are opening positions and often include optimistic add-backs. Final sold prices are typically below asking, which is why you should verify SDE before debating the multiple.
Which industries earn higher multiples?
Businesses with recurring contracts, licensing barriers or transferable systems — managed IT, commercial services, healthcare practices, established e-commerce — usually earn premiums over trade businesses that depend on the owner personally.