Mark Osborne explains how business valuations work using the market approach and EBITDA multiples, typically ranging from 3 to 8x. Most owners assume they deserve the highest multiple, but true 8x companies are exceptionally rare and require exceptional strength.
There's multiple ways to value a business. I mean, there's the 3 predominant ways: income, market, and asset approach. But when you look at market approach, multiple of EBITDA, you know, the industry that the company is in will set the range, the range of values, you know, that 3 to 8x multiple. But where the company falls within that range will depend upon, well, what's the company doing? What are those concentrations? What is the quality of that? You know, and of course, when I talk with sellers and I say, hey, your range is 3 to 8x, what's their mindset always? Oh, I'm an 8x. Yeah. So then I start asking them, okay, do you have X, Y, Z, 1, 2, 3? And no. Okay, well, we've got some of that. Well, you know, we've been working on that. It's in our heads. Well, okay, then you got to remember that the 8x companies are the absolute, like almost pretty much perfect companies. Right. Best in the world. Right. And those are very few and far between.
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