What Is an EBITDA Multiple?
The EBITDA Multiple (or EV/EBITDA) is a valuation ratio that compares a company's Enterprise Value to its EBITDA — Earnings Before Interest, Taxes, Depreciation, and Amortization. It answers: "How many years of current earnings would it take to equal the company's total value?"
Formula
EBITDA Multiple = Enterprise Value / EBITDA
EBITDA = Revenue - Operating Expenses + Depreciation + Amortization
If a company has $10M EV and $2M EBITDA:
EBITDA Multiple = $10M / $2M = 5.0x
Typical Multiples
| Business Type | EBITDA Multiple Range |
|---|---|
| Traditional small business | 3x – 5x |
| SaaS (< $5M ARR) | 5x – 10x |
| SaaS ($5M – $50M ARR) | 10x – 20x |
| High-growth SaaS (> 40% growth) | 20x – 40x+ |
| AI-native companies | 15x – 50x+ |
Why EBITDA (Not Net Income)?
EBITDA strips out financing decisions (interest), tax jurisdictions, and accounting policies (depreciation) to isolate operational profitability. This makes it easier to compare companies across different structures and geographies.
EBITDA Multiple vs Revenue Multiple
| Metric | Best For | Limitation |
|---|---|---|
| EBITDA Multiple | Profitable companies | Meaningless if EBITDA is negative |
| Revenue Multiple | Pre-profit, high-growth companies | Ignores cost structure |
Early-stage SaaS companies often trade on revenue multiples because they prioritize growth over profit. Mature companies trade on EBITDA multiples.
EBITDA Multiple in AI-Run Companies
AI-run companies command higher EBITDA multiples for a structural reason: their margins are sustainable and scalable. A traditional company's EBITDA might compress as it grows (more hires needed), while an AI-run company's EBITDA often expands (AI costs scale sublinearly).
On EvolC, EBITDA multiples help investors compare AI-run businesses on a profitability-adjusted basis. Companies with high EBITDA margins and AI-powered operations often trade at premium multiples because the market recognizes their structural efficiency.