exit multiple
An exit multiple measures how much a business sells for at exit, usually based on a financial metric like revenue, EBITDA, or profit.
An exit multiple captures how much a business sells for compared to a financial baseline—usually revenue, EBITDA, or net income. It’s a fast, comparative way to express deal value. Investors, founders, and acquirers use it to benchmark performance, justify pricing, and estimate returns.
The multiple isn’t just a result—it’s also a signal. It reflects not only what a buyer paid, but also what they believed the business was worth in context: market trends, strategic value, or future potential. And it often shapes expectations for the next deal.
How exit multiples work in practice
A SaaS company sells for $80M after generating $10M in ARR. The exit multiple is 8x. That number doesn’t just describe the outcome—it frames the investor story, informs future funding rounds, and feeds into comps for other companies in the space.
In another case, a founder exits a services business at a 6x EBITDA multiple. The deal aligns with industry benchmarks and reflects both performance and buyer confidence. It becomes the anchor for future valuation discussions—within the company and across the market.
What people get wrong about the exit multiple
Some treat the number as the only metric that matters. But it’s just one part of the story. A high multiple with low profitability might look good but hide fragility. Others use comps blindly, without adjusting for size, growth rate, or sector dynamics.
Another trap: focusing on the multiple without understanding what drove it. Strategic fit, competitive tension, or lack of alternatives often inflate deal value. The multiple reflects outcome—but not always logic.
Numbers tell the story, but context gives it meaning
An exit multiple is more than a ratio—it’s a narrative shortcut. It turns complex valuations into simple comparisons. But for it to be useful, it needs context. Understand what drove the outcome, what it says about the business, and what it implies for future deals. That’s how smart operators turn one number into real insight.
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