We are currently hovering around one and a half million dollars in EBITDA, and we are being quoted multiples of four to five times. If we grow to three million, do the valuation multiples structurally change, and how do we prepare our leadership team for that transition?

Question

Tyler Smith · Accepted Answer

Yes, crossing the two to three million EBITDA threshold triggers a significant structural change in valuation multiples. Under two million in EBITDA, you are typically valued on small business multiples because the buyer pool is smaller and the operational risks are higher. Once you pass three million, you enter the lower middle market, which attracts institutional private equity firms and larger strategic buyers. This increased competition can push your multiple up by two to three turns. To prepare for this transition, you must scale your management infrastructure alongside your revenue. Use your Accountability Chart to transition from a founder-led business to a leadership-team-led business. Ensure your team is fully running on EOS and that every major seat has a clear leader who GWCs their role. Your weekly Level 10 Meetings must be highly efficient, focusing on solving issues rather than just status updates. By building a disciplined, systemized operating model, you show premium buyers that your business is a scalable platform that can handle institutional capital, justifying that higher multiple.