I hear a version of this from owners constantly: “My buddy sold his business for 3x revenue, so mine should be worth about the same.” The problem isn’t the math — it’s that revenue multiples and SDE multiples move in opposite directions as a business grows, and most owners are comparing numbers that were never meant to be compared.

I pulled sold-comp data across nearly 600 closed property management and service business transactions to show this pattern with real numbers rather than anecdotes.

Two multiples, moving in opposite directions

Read that table again. The revenue multiple drops by more than half from the smallest bracket to the largest. Meanwhile the SDE multiple — the number that actually reflects what a buyer is paying for real, transferable cash flow — climbs.

Why this happens

At the smallest end, there usually isn’t enough clean, documented earnings history to build a defensible SDE number, so brokers and appraisers fall back on a rough revenue rule of thumb. It’s a blunt instrument, but it’s the only one available.

As the business scales, two things happen at once. First, margins compress as a percentage of revenue — real overhead, staff, insurance, and systems show up that a solo owner-operator never had to carry. Second, and more importantly, the earnings that remain are of meaningfully higher quality: less owner-dependent, more systematized, more attractive to a wider buyer pool including private equity-backed platforms doing add-on acquisitions.

What this means for your exit timeline

This is a big part of why I talk about the 5 D’s of exit readiness so often. The multiple expansion you get by crossing size thresholds isn’t automatic — it comes from deliberately reducing owner dependency, cleaning up financial documentation, and building transferable systems and contracts. Two businesses at the identical revenue size can land at very different multiples depending on how much of that work has been done.

If you’re two or three years from a sale, this is the highest-leverage window you have. The difference between a 1.6x and a 2.3x SDE multiple on the same earnings number is real money, and it’s driven by decisions you’re making right now, not by market timing.

Frequently asked questions

Is EBITDA multiple the same as SDE multiple?

No. EBITDA excludes owner compensation entirely and is typically used once a business clears roughly $1M in earnings and can support a professional management team. SDE includes a reasonable owner’s salary add-back and is the standard for owner-operated businesses below that threshold.

Why does my broker use SDE instead of revenue to price my business?

Revenue tells a buyer how big the business is; it says nothing about profitability, risk, or what cash actually reaches the buyer’s pocket. Once there’s enough earnings history to work with, SDE or EBITDA is a far more defensible basis for a price, and it’s what serious buyers and their lenders will underwrite against.

At what size should I stop thinking in revenue multiples?

Once you have two to three years of clean, addback-supported earnings and revenue above roughly $150,000–$300,000, buyers and lenders will expect an SDE-based conversation, not a revenue-based one.

Michael Shea represents the Tampa Florida Transworld office. In business since 2005, he has established a reputation as a trusted business broker across Florida’s key markets- from Tampa to Orlando, Melbourne, and more. Over the past two decades, Michael and his team have closed over $1 Billion in sold business volume and presided over more than 450 transactions. His credentials include the IBBA Certified Business Intermediary®, and most recently, the prestigious Certified Exit Planning Advisor® (CEPA) credential. He is also a Florida Licensed Real Estate Broker and Business Brokers of Florida Board Certified Intermediary