Understand sector multiples

Who this is for

Founder led lower-middle market companies with 5 to 50 million in annual revenue that want a grounded view of valuation.

The quick answer

Multiples vary by sector, growth, margin, customer concentration, and capital needs. Build a view from three places. Public comps for direction, private deal reports for current ranges, and banker or valuator input for your niche. Tie your target multiple to quality of earnings and to the share of recurring revenue.

The method in seven steps

Collect public comps for direction
Pick a small set of comparable listed companies. Note revenue growth, margin, and capital intensity. Use this as the upper guide, not a promise.
Gather private deal ranges
Use trusted private market reports for recent deals in your sector and region. Record median and spread for revenue and for EBITDA.
Add niche input
Speak with a banker or valuator who regularly works in your niche and geography. Capture how buyers are pricing specific risk factors right now.
Adjust for your profile
Move up or down based on growth rate, gross margin, concentration, and capital needs. Increase for recurring revenue and quality of earnings. Reduce for customer or supplier concentration.
Build a reference table
Create a simple table with a base multiple, a range, and the factors that would move you within the range.
Test sensitivity
Model what happens to value with one point higher or lower margin and with different levels of recurring revenue.
Refresh twice a year
Markets move. Update your table and your model and socialise changes with your leadership team.

Example

A services firm with strong recurring revenue and low concentration used private deal ranges and niche banker input. They positioned near the top of the range and defended it with clean quality of earnings.

Pitfalls and fixes

Taking public comps as your value. Use them as a directional guide only.
Ignoring concentration and capital needs. Adjust for risk and cash demands.
One time research. Refresh your view twice a year.

Checklist

Public comps list
Private deal range notes
Niche banker or valuator input
Reference table and sensitivity model
Semi annual refresh plan