Sunset Coast Advisors · Version 1.0 · September 2026
GovCon valuation multiples.
One page, versioned and updated quarterly: EBITDA multiple ranges for government contracting services businesses by earnings tier, the drivers that move them, and how the ranges were built. The valuation assessment on this site runs on exactly these numbers.
Base multiple ranges by EBITDA tier, lower middle market GovCon services
| Annual adjusted EBITDA | Low | High | What sets the spread |
|---|---|---|---|
| Under $750K | 2.8x | 3.8x | Owner-dependent, often one or two contracts; buyers price key-person and recompete risk first. |
| $750K to $2M | 3.5x | 4.8x | The most common tier for founder-held firms. Individual buyers, independent sponsors, and small strategics compete here. |
| $2M to $5M | 4.5x | 6.0x | Private equity add-ons and platforms enter; management depth and contract vehicles drive the spread. |
| $5M and above | 5.5x | 7.5x | Platform-scale. Full-and-open share, vehicle access, and cleared workforce set the top of the range. |
Sunset Coast Advisors, version 1.0, September 2026. Next review December 2026. Ranges apply to founder-held services businesses in defense, aerospace, advanced manufacturing, and enterprise software. Product and hardware companies trade on different bases.
The drivers, and how far each one moves the range
| Driver | Adjustment (turns) | How buyers read it |
|---|---|---|
| Revenue trend | -0.65 to +0.60 | Sustained growth above 15 percent supports the top of the range; a declining top line is the fastest compressor in the market. |
| Set-aside dependency | -0.50 to +0.25 | Above roughly 70 percent set-aside revenue, recertification risk narrows the buyer pool to other small businesses. |
| Customer concentration | -0.75 to +0.25 | One customer above half of revenue is a structural discount and often an earnout conversation. |
| Backlog cover | -0.30 to +0.50 | More than two years of funded and priced-option backlog de-risks the forecast; under a year forces buyers to underwrite wins that have not happened. |
| Recompete exposure | -0.50 to +0.25 | A large share of revenue recompeting within 18 months moves value into escrow and earnouts. |
| Prime versus sub | -0.25 to +0.25 | Prime contracts mean customer relationships you own, not borrow. |
| Certifications | context only | SDVOSB, 8(a), and other statuses win the work but rarely transfer. Buyers underwrite the contracts, not the certificate. |
The set-aside discount, attributed
Set-aside-heavy GovCons trade at a steep discount; the only public data shows an average 45 percent discount for majority set-aside firms (HigherGov). Sunset Coast will replace this attributed figure with an owned one when its GovCon lower-middle-market M&A report publishes. Until then, treat it as the best public number and read the small-to-small window for why the discount is a function of buyer pool rather than a law of nature.
Methodology
How the ranges were built
The tiers reflect how lower-middle-market government contracting services companies are underwritten in practice: buyers start from a base multiple set by earnings scale, because scale determines which buyers show up, then adjust for the durability of the earnings. The base ranges are Sunset Coast's read of transaction pricing in this market as of September 2026, informed by our own work, banker-published ranges, and the one public data point on set-aside discounts, which is attributed above.
The drivers are the underwriting questions that recur in every diligence process in this market, expressed as turns of EBITDA. Each driver's adjustment was set so that the combined effect of the strongest and weakest cases spans roughly what we observe between the best and worst companies in a tier. Certifications are context, not arithmetic: they win work but rarely transfer, so the multiple prices the contracts and the driver table explains the status.
What this page is not
It is not an appraisal, a fairness opinion, or a dataset of closed transactions. Lower-middle-market GovCon deals are private, and no free, public, citable multiples source exists at this size. That is why this page exists and why it is versioned: each quarterly review will state what changed and why, and the annual report will replace judgment with observed ranges where the data allows.
How to use it
Find your tier, apply the drivers honestly, and you have a starting range, not a number. The valuation assessment does that arithmetic for you in about five minutes and shows the drivers moving your range. Then the questions get more specific: will my set-asides survive a sale? and how does the money work after I sell?
Versions
- Version 1.0, September 2026: first published version. Tiers and drivers match the valuation assessment. Set-aside discount attributed to HigherGov.
Published by Sunset Coast Advisors. Sunset Coast Advisors is retainer-based. No success fees. Not a broker-dealer. Sunset Coast Capital is the investment arm of Sunset Coast Partners; that interest is disclosed here.
Multiples · questions
Straight answers.
- What multiple do government contracting companies sell for?
- In the lower middle market, services businesses generally trade between roughly 2.8x and 7.5x adjusted EBITDA, depending first on earnings scale and then on contract quality. Companies under $750K of EBITDA sit at the bottom of that range; companies above $5M sit at the top. Within each tier, the drivers on this page move the range by up to a turn and a half.
- Why do set-aside-heavy companies sell for less?
- Set-aside-heavy GovCons trade at a steep discount; the only public data shows an average 45 percent discount for majority set-aside firms (HigherGov). The discount reflects the buyer pool: after a sale to a large business, set-aside orders and options under multiple-award contracts end, so most institutional buyers price that revenue as gone.
- Is EBITDA or revenue the right basis?
- EBITDA, adjusted for owner compensation above market and one-time items. Revenue multiples are sometimes quoted for very small or fast-growing companies, but buyers underwrite earnings and contract durability, and so does this page.
- How current is this page?
- Version 1.0, published September 2026, next review December 2026. Ranges are Sunset Coast's read of the lower middle market; the set-aside discount is attributed to HigherGov until Sunset Coast's own GovCon lower-middle-market M&A report replaces it with an owned figure.
Valuation assessment · About five minutes
What is my company worth?
Most owners find out at the worst possible time: after the letter of intent arrives. Get a clear-eyed, indicative range in about five minutes, and see exactly which drivers move it.