01
How is a private business valued?
Short answer
Most private businesses are valued as adjusted EBITDA times a multiple. The profit a buyer believes will continue is multiplied by a number that reflects risk and growth.
What to know
- Start with EBITDA, then add back one-time and owner-specific costs.
- The multiple rises with recurring revenue, a strong team and low customer concentration.
- Debt, cash and working capital adjust the final price you receive.
What to do next
- 1Pull 3 years of financial statements.
- 2List every expense a new owner would not have.
- 3Get an outside view of the multiple for your industry and size.
02
What multiple will my business sell for?
Short answer
It depends on size, industry, growth and risk. Smaller owner-led service firms often sit lower; larger, recurring, owner-independent firms sit higher.
What to know
- Size matters: bigger profit usually earns a higher multiple.
- Risk lowers it: owner dependence and customer concentration are the biggest drags.
- Growth and recurring revenue raise it.
What to do next
- 1Find your adjusted EBITDA first.
- 2Score yourself on owner dependence and concentration.
- 3Compare with recent deals for similar companies.
03
What are add-backs, and which ones count?
Short answer
Add-backs are costs added back to profit because a new owner would not have them. Buyers accept the ones you can document and reject the rest.
What to know
- Common ones: owner salary above market, personal expenses, one-time legal or moving costs.
- Every add-back needs a paper trail.
- Aggressive add-backs erode trust and get cut in diligence.
What to do next
- 1List each add-back with the amount and reason.
- 2Attach support like invoices or payroll records.
- 3Have your accountant review the list.
Last reviewed September 2026 by the Horizon team. General information, not legal, tax or financial advice.
