What valuation multiple should I expect for my service business?

The Short Answer

For a founder-led service business, typical sale multiples range from 2x to 7x annual earnings (SDE or EBITDA). The multiple depends on one variable more than any other: how much the business depends on the founder. Founder-dependent businesses sell at the low end. System-driven businesses sell at the high end.

What Determines the Multiple

Five factors move the multiple up or down. Revenue predictability: recurring revenue and long-term contracts push the multiple up. Project-based revenue with no backlog pushes it down. Founder dependency: if the business works without the founder, the multiple goes up. If every deal and delivery runs through one person, the multiple drops or the business doesn't sell at all. Documented systems: SOPs, scorecards, and a leadership rhythm that the team runs independently increase transferability and therefore the multiple. Team capability: a trained team that can operate without founder direction reduces the buyer's risk. Growth trajectory: growing businesses command premiums. Flat or declining businesses get discounted.

The Math

A service business doing $2M in revenue with $500K in owner earnings (SDE). At 2x: the business sells for $1M. At 5x: $2.5M. At 7x: $3.5M. The difference between 2x and 5x for this business is $1.5 million. That gap is the operating system. The same revenue, the same clients, the same team. Different systems. Different valuation.

How to Move the Multiple

The 90-day path from low multiple to higher multiple: document the three most founder-dependent processes, install the weekly scorecard and standup, and build the leadership rhythm. After 90 days, the buyer sees a business with systems instead of a business with a single point of failure. This guide covers the five buyer criteria and the full path to exit readiness.

Where to Start

The Growth Navigator Pro ($747/mo) includes exit readiness scoring as part of the Revenue Engine Diagnostic. The Rocket Fuel Sprint ($15,000) builds the operating system that drives the multiple. Start free or talk to David about Exit Velocity.