An EBITDA multiple is the number a buyer applies to a firm's earnings before interest, taxes, depreciation, and amortization to arrive at a purchase price. If an engineering firm produces $1,000,000 of EBITDA and sells for $5,000,000, it sold at a 5 times EBITDA multiple. It is the most common shorthand for pricing architecture, engineering, and surveying firms.
Typical multiples for A/E/LS firms
Which measure applies depends on the size of the firm. Below $2,000,000 in sales, the owner's compensation dominates the income statement, so firms are usually valued on Seller's Discretionary Earnings, and Allen Business Advisors' analysis of valuation databases for closed transactions puts the vast majority between 1.5x and 4.0x. From $2,000,000 to $10,000,000 in sales, EBITDA is the common measure, with the vast majority ranging from 4.0x to 8.0x. Size and profitability drive the number more than anything else, and the type of work performed and the durability of client relationships push a specific firm above or below its band.
What moves the multiple up or down
Buyers and lenders pay for predictability. A deep bench of licensed professionals, a contracted backlog covering six to twelve months of revenue, and a diversified client base support the top of the range. Heavy client concentration, revenue that depends on the departing owner's stamp and relationships, and thin or undocumented backlog pull the multiple down faster than any other factors.
The bank checks the math
An SBA-financed deal requires a valuation supporting the purchase price, and depending on the transaction the lender may be required to order it from an independent third-party valuation firm, the same way a bank orders an appraisal before writing a mortgage. That valuation leans on normalized historical cash flow rather than projections, which ordinarily do not replace documented historical performance. The price also has to survive the DSCR test, because a multiple the firm's cash flow cannot service is a price no bank will finance. That discipline protects buyers from overpaying and gives sellers a defensible number.
