“My friend sold his business for five times earnings.” It’s a sentence that travels fast in owner circles, at industry conferences, and across the tables of business luncheons across the Maritimes. And like most secondhand information about transactions, it’s simultaneously true, misleading, and almost entirely useless for your situation.

Multiples are the shorthand of business valuation. They compress a complex assessment of risk, growth, and market conditions into a single number, and then that number gets passed around in conversation stripped of every piece of context that made it meaningful. Understanding how multiples actually work — what they represent, what drives them, and how the Atlantic Canadian market affects them — is one of the most practical things you can do to prepare for a sale.

Why Revenue Multiples and EBITDA Multiples Are Not the Same Thing

The first point of confusion: people use “multiple” to describe two entirely different things, and conflating them produces wildly inaccurate conclusions.

A revenue multiple expresses the purchase price as a ratio to annual revenue. If a business with $5 million in revenue sells for $3 million, the revenue multiple is 0.6×. Revenue multiples are used in sectors where earnings are harder to normalize, where growth rates are unusually high, or where comparable transactions are measured that way by convention (technology and SaaS businesses, for example, often trade on revenue multiples because their earnings are being intentionally suppressed to fund growth).

An EBITDA multiple expresses the purchase price relative to normalized operating earnings. Most mid-market businesses — manufacturing, construction, food processing, marine, trades, transportation — trade on EBITDA multiples because their earnings are the primary driver of value. This is the metric that matters for the kinds of businesses Conexus advises on.

When your friend says their business “sold for 5×,” confirm whether that’s 5× revenue or 5× EBITDA. For a business with $5 million in revenue and $800,000 in EBITDA, 5× revenue is a $25 million transaction. 5× EBITDA is $4 million. The difference is not trivial.

What the Multiple Actually Represents

Stripping away the mathematics, a multiple is a buyer’s answer to one question: How much risk am I taking, and how much growth am I buying?

A buyer paying 6× EBITDA is saying: I’m confident enough in this business’s future earnings that I’m willing to pay six years’ worth of current earnings upfront to own it. A buyer paying 3.5× is saying: there’s enough uncertainty here that I need to be paid back in three and a half years before this investment starts generating return for me.

Risk compresses multiples. Certainty expands them. The specific factors that drive a buyer’s assessment of risk and opportunity are not arbitrary — they are observable, documented, and to a significant degree, controllable by the seller in the years before going to market.

What Drives Multiples Up

The businesses that command the highest multiples in their size range tend to share a recognizable set of characteristics. Each one represents a reduction in the risk a buyer is accepting when they write the cheque.

Recurring or contracted revenue. A business where 60% of next year’s revenue is already committed through contracts or subscriptions is a fundamentally lower-risk acquisition than one where revenue has to be re-earned from scratch each year. Buyers pay for predictability. Long-term service agreements, supply contracts, and master agreements with renewal provisions all support a higher multiple.

Customer diversification. The rule of thumb is that no single customer should represent more than 15–20% of revenue. When a single relationship accounts for 40% of your revenue, buyers are not just buying your business — they’re taking a concentrated bet on that one relationship surviving the ownership change. That risk gets reflected in the price.

Strong management team independent of the owner. The business that can operate, sell, and manage itself while the owner is away for six weeks commands a materially higher multiple than one where operations depend on the owner’s daily presence. Buyers are not just acquiring assets — they’re acquiring a functioning organization. If that organization only functions because of one person, the acquisition is far more fragile than it appears.

Positive growth trajectory. Three years of consistent revenue and EBITDA growth tells a buyer something very specific: this business is on an upward path, and the purchase price is based on trailing earnings that are likely to be exceeded. A flat or declining business is priced differently — buyers see deterioration risk, not growth upside.

Industry tailwinds and strategic buyer interest. When a sector is consolidating — when national buyers, private equity groups, and strategic acquirers are actively looking for acquisitions in your space — competition for acquisitions drives multiples up. Atlantic Canadian food processing, certain marine sectors, and building materials distribution have experienced this dynamic in recent years. Being in a hot sector at the right time produces meaningful multiple expansion.

What Drives Multiples Down

Every factor that expands a multiple has a mirror image that compresses it. The most significant value destroyers in the Atlantic Canadian mid-market are well-documented and, more importantly, mostly preventable.

Owner dependency. If you are the most important person in your business — if relationships flow through you, decisions wait for you, and operations slow when you’re absent — buyers will price that risk into the multiple. Discounts of 30–50% on comparable businesses are not unusual when the owner is deeply embedded in day-to-day operations with no obvious replacement.

Customer concentration. Already noted on the upside, but worth emphasizing on the downside: a single customer representing 40–50% of revenue is one of the most commonly cited reasons for multiple compression in Maritime mid-market transactions. The concentration risk is real, buyers know it, and they will use it.

Declining revenue or eroding margins. A business where EBITDA has been flat or declining for two or three years is telling a story. The buyer’s job is to project that story forward. If the trajectory is downward, the multiple contracts to account for the probability that the business will be smaller — or less profitable — after the acquisition than before.

Deferred capital expenditure. Equipment that is ageing, facilities that need investment, and technology that hasn’t been updated in years represent future cash outflows that a buyer will need to fund. Buyers see this clearly. The result is either a price reduction equivalent to the anticipated capex, or a multiple compression that reflects the burden of upcoming investment requirements.

Regulatory risk and environmental exposure. Businesses in industries with environmental liabilities, regulatory complexity, or pending compliance requirements face scrutiny that can suppress multiples significantly, particularly in manufacturing and industrial sectors.

Atlantic Canadian Multiples: The Regional Reality

The data on this is consistent and worth confronting directly: Atlantic Canadian businesses sometimes trade at a discount of 0.5× to 1.5× relative to national averages for comparable businesses. A business that would command a 5× multiple in Toronto or Vancouver may realistically achieve 3.5×–4× in New Brunswick or Nova Scotia. That gap is real, it is persistent, and it has a specific cause.

The buyer pool. In a major urban market, a business going to market might attract ten to twenty credible buyers — regional strategic acquirers, national consolidators, private equity groups, family offices, and individual operators. Competitive tension among multiple interested parties drives prices up. In Atlantic Canada, that pool is meaningfully smaller. Fewer competing bids means less upward pressure on price, and a single buyer who knows they face little competition has every incentive to negotiate aggressively.

The regional discount is not a reflection of the quality of Maritime businesses. It is a reflection of the depth of the buyer market. A great business in Halifax still has fewer buyers than an equivalent business in Toronto — which is precisely why working with an advisor who actively cultivates buyer relationships outside the region matters.

There are pockets of exception. Atlantic Canadian seafood and marine-sector businesses attract buyers from across Canada, the United States, and internationally — sectors where Atlantic geography is a strategic asset rather than a liability. Certain manufacturing niches with hard-to-replicate capabilities draw national interest. But these are specific circumstances, not the general rule.

Industry Multiples: Realistic Ranges for Atlantic Canada

These are illustrative ranges, not guarantees. Every transaction is shaped by the specific business, the buyer pool, and market conditions at the time. But they provide a calibration for what is achievable in the current environment:

These ranges assume a business that has been reasonably prepared — clean financials, documented processes, and an owner who is not the single point of failure for the organization. Businesses at the higher end of their range have invested in the preparation work. Businesses at the lower end are being discounted for risks a buyer can see.

Multiples Are an Output, Not a Given

The most important thing to understand about multiples is that they are not something that happens to you. They are, in large part, an outcome of decisions you make — about how you run the business, how you manage your team, how you structure your customer relationships, and how you prepare for the eventual sale. The multiple that a buyer assigns to your business is their summary judgment of the quality, sustainability, and risk profile of everything you’ve built.

That judgment can be influenced. Not manipulated — buyers are sophisticated, and attempts to paper over genuine problems rarely work and often backfire. But prepared sellers, in businesses that genuinely exhibit the characteristics that command higher multiples, consistently achieve better outcomes than unprepared sellers in comparable businesses. The preparation work is real, it takes time, and it pays.

One more point that often surprises sellers: enterprise value is not the same as the cash you put in your pocket at closing. EV is the total value assigned to the business. From that number, the buyer deducts outstanding debt and adjusts for working capital, then pays you the equity value. On a $4 million EV transaction, a seller with $800,000 in bank debt and a working capital shortfall could net significantly less than $4 million in closing proceeds. Understanding the difference between your enterprise value and your actual net proceeds — before you enter a negotiation — is essential. Your M&A advisor should build this bridge clearly early in the process.

Curious about the realistic multiple range for your business? Request a confidential valuation consultation with Conexus M&A. We’ll give you an honest assessment of where you stand and what it would take to improve it.