What businesses sell for in Canada
The ranges buyers actually pay in Canada, by industry, against adjusted earnings. And what moves your number more than your industry does.
Most owner operated businesses in Canada sell for between two and seven times adjusted earnings, and the industry sets where a business starts. Manufacturing and home services sit around three to five and a half times, while restaurants and retail sit lower. Within its range, a business moves with its size and with how much it depends on the owner.
What the number is multiplied by
These ranges are stated against adjusted earnings, which is profit with your own salary and personal costs added back. A buyer takes over the business and leaves those costs with you.
The gap shows up in the price. $320,000 of profit with a $180,000 owner salary is a $500,000 business. At four times, counting it the wrong way costs about $700,000 of price.
- Adjusted earnings
- Also called SDE. It includes your own pay, because it measures what one owner operator sells to another.
- EBITDA
- Assumes a manager is paid to do your job, so your salary stays out and the multiples look higher.
Quoted a multiple? Ask which one, before you react.
The ranges, by industry
Typical Canadian transaction ranges, against adjusted earnings. Read them as context for your own valuation.
| Industry | Typical range |
|---|---|
Manufacturing & Distribution | 3.0 to 5.5× |
Construction & Contracting project-based | 2.5 to 4.0× |
Home & Property Services HVAC, plumbing, electrical, landscaping | 3.0 to 5.5× |
Business & Professional Services accounting, legal, consulting, staffing, cleaning | 3.0 to 5.0× |
Financial Services insurance, mortgage, wealth practices | 4.0 to 6.5× |
Healthcare, dental or veterinary | 4.0 to 7.0× |
Education & Childcare daycare, preschool, tutoring, private schools, training | 3.0 to 5.0× |
Technology software, SaaS, AI, managed IT | 4.5 to 7.5× |
Transportation & Logistics | 3.0 to 5.0× |
Automotive repair, collision, car wash, dealerships | 2.5 to 4.5× |
Consumer & Retail retail, e-commerce, salons, fitness, personal services | 2.0 to 4.0× |
Food & Hospitality restaurants, catering, accommodation | 2.0 to 3.5× |
Agriculture & Natural Resources farms, greenhouses, fishing, forestry | 3.0 to 5.0× |
Energy & Environmental | 2.5 to 4.5× |
Owners regularly file themselves on the wrong row. A maintenance contract renews every year, and a completed job ends with its invoice. If your HVAC, plumbing or electrical business sells renewals, it belongs on the home services row, about a turn and a half higher. What an HVAC, plumbing or electrical business sells for works through one company priced three ways.
Some rows have their own guide, with the buyers and the rules that belong to that industry.
- Dental practices sit on the healthcare row, with provincial rules on who may own one.
- Daycares sit on the education and childcare row, shaped by the $10 a day agreements.
- Manufacturers sit on their own row, where the building and the equipment change the price.
- Accounting practices sit on the professional services row and are often priced on recurring fees.
- Software and managed IT companies sit on the technology row, where contracted revenue carries the value.
- Trucking companies sit on the transportation row, where the fleet can set a floor.
- Auto repair shops sit on the automotive row, with licensed technicians at the centre.
- Restaurants sit on the food and hospitality row, where the lease often matters most.
- Insurance brokerages sit on the financial services row and are priced on the book of business.
Two industries the market prices two ways
A buyer may open on a completely different basis for these.
Practices in this sector are just as often priced on the book of business instead, at roughly two to three times annual commission income. Buyers will quote whichever of the two suits them, so it is worth working out both numbers for your own practice before anyone opens with one.
That range is for a technology business priced on its earnings, which is how managed services, custom development and mature software are bought. If most of your revenue is subscriptions that renew, buyers are likely to price you on recurring revenue rather than profit, and a multiple of earnings is the wrong tool: a fast growing business with thin margins can be worth several times what this range implies. It is worth saying which one you are before you accept anybody’s arithmetic.
Franchised dealerships are usually priced another way: a goodwill figure, often called blue sky, set as a multiple of adjusted pre-tax earnings, plus inventory, parts and equipment at cost. A buyer quoting one number for a dealership has folded the two together, and it is worth asking to see them apart.
Farms, fishing operations and forestry businesses are mostly priced on what they own: land, quota, licences and equipment, each valued on its own. A multiple of earnings is only part of the price here, and often the smaller part.
Size moves the range before anything else does
The range moves in steps. Crossing a threshold changes who is bidding.
- Below $500K of adjusted earnings, most buyers are individuals and the range sits roughly half a turn lower.
- From $500K to $1M, most individual and strategic buyers are looking, and the table applies as printed.
- Above $1M, private equity starts to screen, which adds about a third of a turn.
- Above $2M, the pool widens again, and the range rises around six tenths of a turn.
- Above $5M, institutional buyers arrive and the range rises a full turn.
That is the case for preparing before going to market. Taking adjusted earnings from $900K to $1.1M at a typical four times adds roughly a third to the price, because the higher earnings also cross into a higher multiple and a wider pool of buyers.
Four things that move your own number
Within your range, these are what buyers actually price. Our own valuation asks about the same four.
How much of your revenue comes from your single largest customer?
- Under 10 percent. no single customer can materially hurt the business (+0.15×)
- 10 to 30 percent. customer concentration is within the normal range
- Over 30 percent. one customer leaving would change the business, which buyers price for (−0.35×)
If you were away from the business for six months, how would it run?
- A management team already runs it. the business is not dependent on you personally (+0.4×)
- It would cope, with some disruption. someone other than you could hold the business through a transition (+0.2×)
- It would struggle immediately. the owner runs it day to day, which is the normal case at this size
How much of your revenue repeats without being re-won?
- Mostly contracts or repeat customers. revenue that repeats is worth more than revenue that must be re-won (+0.3×)
- A mix of repeat and one-off work. a normal mix of repeat and project work
- Mostly one-off projects or walk-ins. every dollar has to be won again next year (−0.15×)
What have the last three years of earnings looked like?
- Growing steadily. a rising trend is the strongest single argument for a higher multiple (+0.2×)
- Roughly flat. stable earnings, neither helping nor hurting
- Declining or erratic. buyers discount earnings that are falling (−0.3×)
Three of the four are fixable, and all three take about a year to show in the numbers. Start before the sale does.
What a range leaves out
A range sees your industry and your size. Your contracts and your lease sit outside it, and so does the competitor who would pay above it for your customer list. It tells you which conversation you are having, so keep it for your own planning when you talk to a buyer.
Which number the range is applied to matters as much as the range: SDE or EBITDA sets out the difference, and Preparing a business for sale is the year that moves the four factors above.
Questions owners ask
- What multiple do small businesses sell for in Canada?
- Most owner operated businesses in Canada sell for two to seven times adjusted earnings. The industry sets the range, and four factors place a business within it, led by its size and by how much it depends on its owner.
- Are Canadian business multiples lower than American ones?
- Usually they look lower, and the main reason is what is being multiplied. Published American multiples are typically quoted against EBITDA for larger companies. Canadian owner operated businesses are priced against adjusted earnings, which include the owner’s pay, so the multiple looks lower even when the price is similar.
- What are adjusted earnings?
- Profit with the owner’s salary and personal costs added back, since a buyer leaves those with the seller. It is sometimes called seller’s discretionary earnings, or SDE. It is the number a buyer of an owner operated business actually receives.