Read MSP Valuation by Size Without Inventing a Jump

Put Earnings on a Consistent Basis First

EBITDA means earnings before interest, taxes, depreciation, and amortization. The MSP model measures it after a fair-market owner salary. Use that basis before selecting the size row; leaving the owner's work unpaid changes both earnings and the multiple the model applies.

A valuation multiple expresses business value as a number of times annual earnings. The calculation is EBITDA multiplied by the applicable multiple. The lookup below uses US-dollar earnings, so keep this comparison in US dollars throughout.

The main curve follows a straight line between the listed rows and holds the multiple at 11.0x above $5 million of EBITDA. Holding the multiple flat does not cap business value: higher earnings still increase the result at that multiple.

Calculate the Position Between the Rows

Take the model's hypothetical US stable MSP, with $730,276 of annual EBITDA. It sits between $500,000 and $1 million, so the relevant multiple rises from 4.75x to 6.50x. Use its position within that interval rather than rounding the business down to the lower row.

First subtract $500,000 from $730,276, giving $230,276. Divide that by the $500,000 gap between the earnings rows. The result is about 46.1% of the way through the interval.

The multiple rises by 1.75 turns across the interval, from 4.75x to 6.50x. Add about 46.1% of those 1.75 turns to 4.75x and the applicable multiple is about 5.56x. The model reports a value of $4,057,386 using its underlying precision.

Keep that precision in the worksheet and round the displayed result afterward. Multiplying the displayed 5.56x by the displayed earnings will not reproduce the reported value exactly. A rounded display is useful for reading; it is a poor input for another calculation.

Treat the $500,000 Boundary as a Model Artifact

Below $500,000, the main model uses 4.0x. As earnings approach $500,000 from below, calculated value approaches $2 million. At exactly $500,000, 4.75x produces $2,375,000.

That is a discontinuity of about $375,000 around the boundary. It comes from joining the below-threshold assumption to the table. It does not establish that a buyer will increase an offer by that amount because earnings cross the line.

I'd show both sides explicitly whenever a planning result depends on that boundary. Keep the actual earnings improvement separate from the curve's sudden change. Otherwise a small operating change can appear to create a large, certain sale benefit that exists only in the chosen method.

Separate the Institutional Threshold From the Curve

The model uses $1 million of adjusted EBITDA as a threshold where institutional buyers start to look. That is a separate planning assumption about buyer interest. It is not an instruction to add another premium to the 6.50x multiple.

At $1 million, the curve arrives continuously at 6.50x from below and continues toward 8.0x at $2 million. At $2 million, it continues toward 9.0x at $3 million. The rate at which the multiple changes can differ between intervals, but the value does not jump at those rows.

Keep buyer interest and model value in separate parts of your plan. Reaching an earnings threshold does not establish a particular buyer's interest, acceptable adjustments, or offer. The model's warning that businesses below about $250,000 of EBITDA are barely sellable is likewise a saleability assumption, not another step in this curve.

Recalculate Both Earnings and the Multiple for a Margin Point

Hold the example MSP's $3,634,615 annual revenue constant. A percentage point of EBITDA margin adds about $36,346 of annual earnings, taking the $730,276 starting amount to about $766,622. That is an arithmetic scenario; the operating change still has to deliver those earnings.

At the higher earnings, the same interpolation produces about 5.68x and a model value of roughly $4.357 million. Compare that with the starting value of about $4.057 million: the modeled gain is roughly $299,000, using the calculation before rounding. Earnings and the multiple both increased.

Do the whole-business calculation on each side of a proposed change. Multiplying only the extra earnings by the old multiple omits the change in the multiple applied to the existing earnings. Around the $500,000 discontinuity, show how much of the difference comes from that method choice.

Compare Curves Without Assuming a Fixed Discount

The model also includes an alternative adviser curve labeled conservative. That label does not mean every size row is lower than the main curve. Compare the actual numbers at the earnings level you are using.

At the US stable example's size, the alternative gives $2,666,513, below the main value of $4,057,386. At the larger table rows shown here, the ranking changes. A model label cannot replace looking up the actual case.

Keep a valuation worksheet with the earnings basis, curve year, interval, interpolation, and alternative result visible. Refresh the assumptions on the model's yearly review schedule and when assessing an actual offer. Use the curve to understand a planning result, then keep that result separate from negotiated terms and the cash you would receive.