This cheat sheet provides estimated price-to-revenue (P/Revenue) and price-to-EBITDA (P/EBITDA) multiples for small businesses across various industries, based on heuristic and empirical data from transactional and valuation analyses and cross-referenced with market research. These ranges are tailored for SBA 7(a) loan valuations, focusing on businesses with revenues typically under $5M. This cheat sheet is designed to assist SBA lenders, brokers, and valuation professionals in identifying ballpark value ranges based on revenue and earnings multiples.  Multiples vary due to factors like industry risk, growth potential, profitability, and company size. Always consult a valuation expert for precise assessments.

While multiples such as price-to-revenue (P/Revenue) and price-to-EBITDA (P/EBITDA) offer convenient heuristics for preliminary business valuations, they inherently fall short of capturing the foundational financial principles that underpin accurate assessments—namely, the present value of projected net free cash flows discounted at a risk-adjusted rate of return. At its core, business valuation relies on forecasting the net free cash flows a company can generate after accounting for operating expenses, taxes, working capital needs, and capital expenditures, then discounting those flows using a rate (like the weighted average cost of capital) that incorporates the business’s specific risks, including market volatility, operational uncertainties, and industry dynamics. Multiples, by contrast, serve as simplistic proxies derived from comparable transactions or companies, assuming uniformity in cash conversion efficiency, growth trajectories, and risk profiles that rarely exists in reality; for instance, they overlook variations in discretionary owner expenses, non-recurring income, or differing capital intensity, potentially leading to over- or undervaluations, especially in heterogeneous small business contexts where unique factors like owner dependence or localized market conditions dominate. Thus, while multiples provide a useful starting point for SBA lenders, they risk delivering inaccurate estimates without deeper analysis through methods like capitalization of earnings, which more rigorously align with these core principles.

Valuation Multiples by Industry

Industry	P/Revenue Range	P/EBITDA Range
Auto Body	0.34–0.54	1.53–2.67
Auto Repair	0.33–0.56	1.20–2.49
Behavioral Health	0.45–0.62	1.59–2.49
Boutique Fitness	0.48–0.61	1.51–2.52
Chiropractor	0.51–0.66	1.25–1.67
Convenience Store	0.21–0.54	1.31–2.60
Copy Shop	0.49–0.58	2.15–2.54
CPA/Accounting	0.65–1.00	1.64–2.75
Daycare/Childcare	0.44–0.57	1.71–2.26
Dental Practice	0.48–0.58	0.93–1.87
Dry Cleaners	0.36–0.71	1.01–2.33
Ecommerce	0.31–0.84	1.34–2.35
Electrical Contractor	0.36–0.58	1.55–2.84
Engineering	0.39–0.62	1.48–2.62
Equipment Distributor	0.46–0.72	1.64–3.48
Fitness Center	0.41–0.63	1.72–2.62
Florist	0.28–0.62	1.34–2.31
Grocery Store	0.24–0.45	0.91–2.28
Hair Salon	0.23–0.52	0.84–2.07
Home Health Care	0.36–0.57	1.56–2.64
HVAC	0.29–0.53	1.39–2.35
Janitorial Services	0.33–0.62	1.68–2.46
Landscaping	0.39–0.62	1.29–2.57
Laundromat	0.58–1.02	1.74–2.79
Liquor Stores	0.29–0.43	1.78–2.88
Machine Shop	0.59–0.76	2.27–3.06
Manufacturing	0.39–0.63	1.90–2.32
Med Spa	0.43–0.53	1.52–1.77
MSP (Managed Service Provider)	0.48–0.76	1.73–3.18
Non-Emergency Medical Transport	0.49–0.71	1.67–2.82
Optometry	0.31–0.52	1.36–2.87
Pawn Shop	0.39–0.61	1.35–1.81
Pest Control	0.57–0.87	2.20–2.88
Pet Boarding	0.58–0.71	1.46–1.89
Pharmacy	0.30–0.82	1.01–3.02
Physical Therapy	0.37–0.56	1.31–2.39
Physician	0.33–0.59	1.20–2.34
Plumbing	0.31–0.56	1.59–2.71
Pool Cleaning	0.54–0.68	1.76–2.48
Property Management	0.54–0.72	1.63–2.48
QSR Franchise	0.27–0.37	1.46–1.87
Residential Cleaning	0.44–0.62	1.28–2.43
Restaurant	0.15–0.51	0.72–3.30
Restoration	0.50–0.65	2.08–2.69
Roofing Contractor	0.27–0.56	1.55–2.53
Specialty Retail	0.30–0.46	1.32–1.82
Towing Company	0.44–0.66	1.76–2.76
Tutoring Center	0.45–0.72	1.63–2.84
Urban Farm/Garden Retail	0.28–0.46	1.60–2.43
Veterinary Clinic	0.53–0.72	1.30–2.98

Key Considerations for SBA Lenders

P/Revenue Multiples: Typically range from 0.15–1.02 for small businesses. Higher multiples apply to industries with recurring revenue (e.g., CPA/Accounting, Laundromat) or high growth potential (e.g., Ecommerce, MSP). Lower multiples apply to competitive, low-margin sectors (e.g., Restaurant, Grocery Store).

P/EBITDA Multiples: Generally range from 0.72–3.48 for small businesses. Higher multiples are seen in industries with stable cash flows (e.g., Machine Shop, MSP) or specialized services (e.g., Pest Control, Restoration). Lower multiples apply to owner-dependent or high-risk businesses (e.g., Hair Salon, Dental Practice).

Influencing Factors:

Company Size: Larger firms (even within the < $5M revenue range) often command higher multiples due to operational efficiencies.

Growth Potential: High-growth industries (e.g., Ecommerce, MSP) may see higher P/Revenue multiples.

Profit Margins: Businesses with EBITDA margins >20% (e.g., MSP, Pest Control) attract higher multiples.

Recurring Revenue: Industries like Property Management and CPA/Accounting benefit from stable, predictable cash flows, boosting multiples.

Risk Factors: Owner dependence, customer concentration, and market competition lower multiples (e.g., Hair Salon, Restaurant).

How to Use

This cheat sheet is a heuristic tool derived from empirical data, including transactional and valuation analyses, supplemented by market research. It provides tight ranges for P/Revenue and P/EBITDA multiples to estimate business values for SBA 7(a) loan purposes. Below is guidance on practical application:

1. Estimate Value:
   • Multiply the business’s trailing twelve-month (TTM) revenue or EBITDA by the respective multiple range to estimate a valuation range. For example, a Dental Practice with $500,000 revenue and $200,000 EBITDA might be valued at $240,000–$290,000 (P/Revenue: 0.48–0.58) or $186,000–$374,000 (P/EBITDA: 0.93–1.87).
   • Use P/EBITDA for businesses with stable profitability (e.g., MSP, Pest Control) as it better reflects cash flow health. Use P/Revenue for businesses with low or inconsistent profits (e.g., Restaurant, Grocery Store) or high growth potential (e.g., Ecommerce).
2. Choosing the Right Multiple:
   • Low End: Apply the lower end of the range for businesses with higher risks, such as owner dependence (e.g., Hair Salon, Physician), customer concentration, or low margins (e.g., Grocery Store, QSR Franchise). Also consider smaller firms or those in competitive markets.
   • Mid-Range: Use the middle of the range for businesses with stable operations, moderate growth, and average risk profiles (e.g., Auto Repair, Janitorial Services).
   • High End: Apply the higher end for businesses with strong growth potential, recurring revenue (e.g., CPA/Accounting, Property Management), high EBITDA margins (>20%), or unique market positions (e.g., Pest Control, Machine Shop).
   • Cross-Check: Compare P/Revenue and P/EBITDA valuations. If they diverge significantly (e.g., high P/Revenue but low P/EBITDA), prioritize P/EBITDA for profitability-driven industries or investigate underlying issues (e.g., inflated revenue, low margins).
3. Flagging Outliers:
   • Revenue or EBITDA Anomalies: Verify financials if revenue or EBITDA seems unusually high or low compared to industry norms (e.g., a Restaurant with $1M revenue but $50,000 EBITDA may indicate inefficiencies, warranting a lower multiple).
   • Wide Ranges: For industries with wide ranges (e.g., Ecommerce P/Revenue: 0.31–0.84, Restaurant P/EBITDA: 0.72–3.30), assess company-specific factors like growth trends, customer retention, or market competition to narrow the range.
   • Market Trends: If a business’s implied valuation seems too high (e.g., near the top of the range in a low-growth industry like Florist), it may be an outlier. Conversely, undervaluation in high-growth sectors (e.g., MSP) may suggest untapped potential or financial discrepancies.
4. Adjust for Risk:
   • Evaluate company-specific risks: owner dependence, customer concentration, regulatory changes, or economic sensitivity. For example, reduce multiples for a Hair Salon with one dominant stylist or a Pharmacy facing regulatory shifts.
   • Consider local market conditions (e.g., a Convenience Store in a prime location may justify a higher multiple).
   • Account for recent financial performance. Use TTM data, but if trends show declining revenue or margins, lean toward the lower end of the range.
5. Validate with Experts:
   • This cheat sheet is a preliminary tool, not a substitute for a formal valuation. Engage a certified business appraiser for SBA-compliant valuations.
   • Use additional resources like DealStats, BizBuySell, or industry reports to confirm multiples, particularly for industries with limited data.

Disclaimers

Not a Formal Valuation: This cheat sheet does not constitute a formal business valuation, appraisal, or conclusion of value. Any estimated value derived from applying these multiples should be considered a rough indication only and may differ materially from a qualified fair market value appraisal conducted in accordance with professional valuation standards (e.g., USPAP, NACVA, ASA).  Fair market value may differ substantially due to company-specific factors, market conditions, or detailed financial analysis. Always obtain a professional appraisal for SBA loan purposes.

Heuristic and Empirical Nature: The multiples are derived from heuristic data and empirical transactional and valuation analyses, supplemented by market research. They represent general trends for small businesses and may not reflect unique circumstances of individual companies.

User Risk: Use of this information carries inherent risks. Multiples are estimates and may not account for specific risks such as owner dependence, customer concentration, or economic shifts. Users assume full responsibility for decisions made based on this cheat sheet.

Data Limitations: Some industries have limited data (e.g., single-source data for Copy Shop, Daycare). Variations between sources may reflect regional, transactional, or sample size differences.

Market Volatility: Multiples may not reflect future economic changes, interest rate fluctuations, or industry-specific disruptions. Lower interest rates may increase multiples, but volatility remains a risk.

No Guarantee of Accuracy: While efforts have been made to ensure accuracy, no guarantee is provided regarding the reliability or applicability of these multiples. Actual transaction values may vary significantly.

Consult Professionals: Lenders should consult certified business appraisers or valuation experts to ensure compliance with SBA regulations and to obtain precise valuations tailored to specific businesses.

Informational Purposes Only: This cheat sheet is provided for informational and educational purposes only and is not intended to be, and should not be construed as, financial, legal, tax, or investment advice. It does not take into account the specific objectives, financial situation, or needs of any individual or entity.

Use at Own Risk: Users apply this information at their own risk. No representation or warranty, express or implied, is made as to the accuracy, completeness, or suitability of the data, multiples, or methodologies presented. Actual business values may vary materially based on numerous factors not addressed herein.

No Liability: The creators, providers, and distributors of this cheat sheet disclaim all liability for any loss, damage, or expense arising from the use or misuse of this information, including but not limited to errors in data, changes in market conditions, or reliance on the estimates provided.

Consult Professionals: Users are strongly advised to seek independent professional advice from qualified appraisers, accountants, attorneys, or financial advisors before making any decisions based on this cheat sheet. Compliance with applicable laws, regulations (including SBA guidelines), and standards is the sole responsibility of the user.

Subject to Change: The multiples and guidance may become outdated due to economic shifts, industry trends, or new regulations. We reserve the right to modify or discontinue this resource without notice.

Commentary on Disconnects Between Multiples-Based Estimates and the Capitalization of Earnings Method

While market multiples like price-to-revenue (P/Revenue) and price-to-EBITDA (P/EBITDA) provide a straightforward, comparable-based snapshot for estimating business value—drawing from observed transaction data or peer benchmarks—they can diverge significantly from the capitalization of earnings method, which is an income approach that capitalizes normalized free cash flow at a risk-adjusted rate (such as the weighted average cost of capital, or WACC) to derive a present value. This disconnect arises because multiples inherently assume a level of uniformity across comparable businesses in terms of growth prospects, risk profiles, etc., often overlooking company-specific nuances like unique operational efficiencies, non-recurring expenses, or differing capital structures; in contrast, the capitalization method explicitly forecasts sustainable cash flow (e.g., after adjustments for owner compensation, taxes, and capital expenditures) and applies a capitalization rate (inversely related to WACC) that accounts for time value of money, inflation, and idiosyncratic risks, potentially yielding higher or lower values depending on the business’s profitability and stability.

For instance, in dental practices, where multiples might imply a value of 0.48–0.58x revenue or 0.93–1.87x EBITDA (as per the cheat sheet), capitalizing robust free cash flows—say, $300,000 annually at a 20% capitalization rate—could result in a valuation exceeding $1.5 million for a $600,000 revenue practice, far above the multiples-based estimate, due to the method’s emphasis on recurring patient revenue, low capital intensity, and stable margins that multiples undervalue if comps include underperforming peers. Similarly, for CPA firms, a business with $1 million in revenue but only $200,000 in net free cash flow might appear undervalued at 0.65–1.00x revenue ($650,000–$1,000,000), yet capitalizing that $200,000 at a 15-25% rate (considering professional services’ lower risks and recurring client base) could produce a fair market value of $800,000–$1.33 million, potentially higher, highlighting how multiples fail to capture the full economic benefits when margins are compressed but cash flows are resilient.

These discrepancies underscore the need for hybrid approaches or sensitivity analyses in valuations, as multiples risk oversimplification in industries with variable revenues and profitability.