EBITDA Multiple
Value a trading business on an EBITDA multiple, with FF&E reserve adjustment.
Introduction
Who this is for: Buyers and sellers of trading assets — hotels, care homes, leisure.
Why it matters: Trading assets are bought on earnings, not bricks. The multiple applied reflects covenant, brand, location and how much of the earnings depend on the current operator.
Typical scenario: A regional hotel presented at 12x EBITDA where the buyer suspects the FF&E reserve has been omitted.
- Valuing on EBITDA before an FF&E reserve, which overstates sustainable earnings.
- Using a vendor’s adjusted EBITDA without testing the add-backs.
- Applying a prime multiple to an asset with concentrated or volatile earnings.
Inputs
Trading
Valuation
x
Analysis
Reported EBITDA of £780,000 less a £112,000 FF&E reserve and £40,000 of rejected add-backs gives adjusted EBITDA of £628,000. At 11x that implies £6,908,000; the asking price of £9,000,000 implies 14.3x.
This analysis provides context, not financial advice. Consult a qualified adviser before making investment decisions.
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Live Results
Adjusted EBITDA
£628,000
Implied Value
£6,908,000
Multiple at Asking
14.33x
Value Gap
£-2,092,000