Do you include net assets up and above multiple of EBITDA when valuing a retail business?

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December 17, 2025

by a searcher from Concordia University - John Molson School of Business in Montreal, QC, Canada

A bit of a silly question, but when selling a retail store, do buyers pay a multiple of EBITDA plus net asset value? Essentially, the multiple of EBITDA is the cost for goodwill, and the cost of inventory, machinery, NWC etc. is a separate item. I know this is how pharmacies work, I was curious if this is done for more standard retail businesses as well?
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Reply by a searcher
from University of KwaZulu in Vancouver, BC, Canada
No, you pay either the NAV or the multiple of EBITDA. NAV is the value of the assets in isolation, while EBITDA is the cashflows generated from those assets (a multiple being the value of the cashflows). They are two separate valuation methods and you would typically use the higher of the two (most often EBITDA multiple, except in distressed/turnaround/bankruptcy situations). In the EBITDA multiple scenario you could adjust for excess working capital if there is more working capital in the business than is needed, but this would only reflect the excess portion of that working capital (defining excess is often an interesting topic to discuss and negotiate, but largely would just use normalized levels)
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Reply by a professional
from York University in Toronto, ON, Canada
You either pay for cash flow (ie. EBITDA) OR assets, not both. That would be the seller double-dipping for the same business. This has also been true for the pharmacy based transactions we've done where EBITDA has been the basis for valuation with a working capital adjustment that includes inventory
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