You may hear the phrase maximum multiple used throughout this content. So what exactly is a maximum multiple — and what does it actually take to get one when you go to sell your business? It is not just a higher number than whatever the market pays. The business owners who achieve the maximum multiple do not get lucky. They build toward it deliberately, years in advance. Learn the complete system in Exit Ratio 360™ and at Exit Ratio 360™ — the 360-point evaluation system.
What is a maximum multiple in a business sale?
A maximum multiple is the highest EBITDA multiple the market will pay for your specific business at the specific moment you go to market — not just any high number but the ceiling available to you based on your industry, your preparation quality, and your ability to prove your value before a buyer asks. If your industry trades between seven and ten times EBITDA, a maximum multiple is at or above that ceiling — achieved when you have a Titan Thesis, quality of earnings documentation, a strong management team, and recurring revenue that a buyer can model future performance on.
What is a maximum multiple in a business sale?
A maximum multiple is the highest EBITDA multiple the market will pay for your specific business — achieved when you have a Titan Thesis, quality of earnings documentation, strong management depth, and recurring revenue that a buyer can model future performance on. It is achievable with preparation.
What is the difference between an A plus deal and a C deal?
An A plus deal is the hot company at the table — every buyer wants it, it has everything they are looking for, and they are competing to own it. You get maximum multiple or above. An A deal is strong toward the top of the range. A B deal means you are missing 10 to 15 percent of what could be done. A C deal means you are missing 20 to 30 percent. A D deal — and D stands for do not do it — means you are leaving a significant amount on the table and the conditions attached to the deal are going to keep you working for the buyer far longer than you planned.
What is the difference between an A plus deal and a C deal?
An A plus deal is the company every buyer wants — maximum multiple or above. An A deal is strong but missed a couple of things. A B deal is missing 10 to 15 percent. A C deal is missing 20 to 30 percent. A D deal means leaving significant money on the table and conditions keep you working for the buyer longer than you planned.
What are the four variables that determine your exit multiple?
Four specific variables determine where in the multiple range your business lands. EBITDA quality — the defensibility of your profit number, documented through a quality of earnings report. Owner dependency — can the company run without you in the building. Recurring revenue percentage — 40 percent or above as a monthly or annual committed revenue base. And management depth — how good is the team, how independently do they operate, and how actively are they being recruited. Those four variables, taken together, produce your score on the multiple spectrum.
What are the four variables that determine your exit multiple?
EBITDA quality — the defensibility of your profit number through quality of earnings documentation. Owner dependency — can the company run without you. Recurring revenue percentage — 40 percent or above. Management depth — how good is the team and how independently do they operate. These four variables taken together produce your score on the multiple spectrum.
How does the Titan Thesis connect to the maximum multiple?
The Titan Thesis is the proof document that supports a maximum multiple claim. When you go to market asking for twelve times in an industry that trades at ten — and a buyer asks why — the Titan Thesis is the answer. Quality of earnings for three years. Clean financials. Standard operating procedures. Decision bands for the management team. Recurring revenue documentation. Client concentration below 15 percent. The Titan Thesis says: I have everything you would ask for and I have had it documented for years.
How does the Titan Thesis connect to the maximum multiple?
The Titan Thesis is the proof document that supports a maximum multiple claim. Quality of earnings for three years, clean financials, SOPs, decision bands, recurring revenue documentation, client concentration below 15 percent. When you ask for twelve in an industry that trades at ten, the Titan Thesis is the answer to why you deserve the premium.
What can you do in the next 90 days to move your multiple one point?
Pick the weakest of the four variables — EBITDA quality, owner dependency, recurring revenue, or management depth — and focus the entire organization on it for 90 days. Define the outcome, assign the team member who owns it, and run weekly report-outs against the target. The 90-day sprint is also the first test of owner independence — you are going to point to someone on your team and say you are in charge of this, because that is the first step toward getting decision-making to flow away from you.
What can you do in the next 90 days to move your multiple one point?
Pick the weakest of the four variables — EBITDA quality, owner dependency, recurring revenue, or management depth — and focus the entire organization on it for 90 days. Define the outcome, assign the team member who owns it, run weekly report-outs. The 90-day sprint is also the first test of owner independence.
How much more money is the maximum multiple worth versus a market multiple?
On a business with $3 million in EBITDA the difference between a market multiple of seven and a maximum multiple of twelve is $15 million. On a business with $5 million in EBITDA that same difference is $25 million. These are not theoretical numbers — they are the real dollar difference between a business that went to market prepared and one that did not. You spent years building this business. The effort you put in deserves to be rewarded with the highest possible return at exit.
How much more money is the maximum multiple worth versus a market multiple?
On a business with $3M in EBITDA the difference between a market multiple of seven and a maximum multiple of twelve is $15 million. On a $5M EBITDA business that same difference is $25 million. These are the real dollar differences between a business that went to market prepared and one that did not.
Related: Titan Thesis | 5-4-3-2 Framework | Quality of Earnings | BENCH Framework | Exit Ratio 360™ on Amazon
About Scott Sylvan Bell
Scott Sylvan Bell is a mid-market exit strategy consultant and the creator of the Exit Ratio 360™. His book is available on Amazon.