When entrepreneurs evaluate business opportunities, the allure of high EBITDA multiple businesses is undeniable. These are the companies that sell for six, eight, or even ten times their earnings—the SaaS platforms, specialized professional services firms, and asset-light operations that investors dream about. The math is seductive: if you can build a business that generates $500,000 in EBITDA and commands a 7x multiple, you’re looking at a $3.5 million exit versus perhaps $1.5 million for a traditional service business at 3x. The upside potential is dramatically higher.
But here’s what the spreadsheets don’t tell you: these premium-multiple businesses are extraordinarily difficult to get off the ground. The very characteristics that make them valuable to acquirers—recurring revenue, strong margins, defensible competitive advantages, and scalability—are precisely what make them challenging to establish in the first place.
Consider the software-as-a-service business model, which consistently commands some of the highest multiples in the market. Building a SaaS company means developing a product before you have a single paying customer. You need technical expertise or the capital to hire it. You must understand complex problems well enough to build elegant solutions. The feedback loops are long—you might spend six months building features only to discover the market doesn’t value them. The skills required span product development, user experience design, software architecture, and go-to-market strategy. Most founders stumble through multiple pivots before finding product-market fit, if they find it at all.
Compare this to starting a pressure washing business or a lawn care service. You can acquire your first customer this week, generate revenue by the weekend, and validate demand with minimal upfront investment. The learning curve is manageable. The feedback is immediate. Yes, these businesses typically sell for lower multiples because they’re harder to scale and more dependent on the owner’s labor, but the path from zero to cash flow is far more straightforward.The time horizon difference is equally stark. A high-multiple business might take two to three years just to reach profitability, let alone the scale needed to attract sophisticated buyers. During that period, you’re burning through savings or investor capital, making strategic bets with incomplete information, and carrying the psychological weight of building something that doesn’t yet generate returns. Traditional businesses often achieve profitability within months and provide steady cash flow that can fund growth or simply pay your mortgage while you build.
The skill requirements create another significant barrier. High-multiple businesses typically succeed because they solve complex problems in innovative ways or serve sophisticated markets with nuanced needs. A consulting firm that commands premium multiples probably serves Fortune 500 clients with intricate strategic challenges. A healthcare technology business must navigate regulatory requirements, integration complexities, and lengthy sales cycles. The founder needs not just business acumen but deep domain expertise, technical knowledge, or both.
This explains why experienced entrepreneurs often start with traditional businesses first. The dry cleaner who eventually builds a chain, the contractor who develops a construction management software company, or the accountant who creates a tax preparation platform—they typically master the basics of running a business before attempting to build one that commands a premium multiple. They develop operational discipline, learn how to manage cash flow, and build a network of relationships while generating steady income.
None of this means you shouldn’t pursue a high-multiple business opportunity. The potential rewards justify the risks for many founders, and some people possess the unique combination of skills, resources, and risk tolerance to jump straight into these ventures. If you have technical expertise, industry connections, or previous startup experience, your probability of success increases substantially. If you can afford an extended runway without income or have access to patient capital, the time horizon becomes less daunting.
But it’s crucial to enter these ventures with clear eyes about what you’re signing up for. The entrepreneur who starts a premium business thinking it will be a quick path to wealth often discovers too late that they’ve committed to a marathon requiring specialized skills they don’t yet possess. Meanwhile, the founder who builds a modest but profitable traditional business might not achieve the same exit multiple, but they generate actual wealth along the way and develop the skills and capital to take bigger swings later.
The most successful entrepreneurs understand that business building is often sequential, not binary. You don’t have to choose between high-multiple upside and near-term viability forever. Many legendary companies started as humble services businesses before evolving into scalable, high-multiple operations. They used the cash flow and market knowledge from their initial iteration to fund and inform their transformation into something more valuable.
The bottom line is this: high EBITDA multiples reflect genuine value creation, but that value is hard-won through time, skill, and often considerable struggle. If you’re prepared for that reality—if you have the expertise, resources, and temperament to weather the journey—the upside can be transformative. But if you’re seeking a path to business ownership that generates income sooner and requires less specialized knowledge, there’s no shame in starting with a more traditional model. You can always trade up later, armed with the cash flow, experience, and confidence that come from building something profitable from the ground up.