How Machine Shops Businesses Are Valued
Machine shops are valued on Seller's Discretionary Earnings (SDE) or EBITDA, with equipment condition, customer contracts, and specialty capabilities being the primary factors. Buyers differentiate between job shops (custom, short-run work) and production shops (long-run, contracted work). Production shops with OEM supply agreements and quality certifications command significantly higher multiples.
SDE = Net Profit + Owner’s Salary + Owner Benefits + Discretionary Expenses
They then multiply your SDE by an industry-specific multiple derived from comparable transactions. For Machine Shops businesses, that multiple currently ranges from 2.5x to 4.5x.
Quick Example
A Machine Shops business with $300K in SDE at a 3.5x multiple would have an estimated value of $1.05M. At the full range of 2.5x–4.5x, the estimated value is $750K–$1.35M.
Current Machine Shops Multiples
These ranges reflect recent transaction data for machine shops in the $1M–$10M revenue range. Shops with ISO certification, OEM contracts, and modern CNC equipment consistently trade at the upper end.
| Revenue Range | Typical SDE Multiple | What This Means |
|---|---|---|
| Under $1M | 2.0x – 2.8x | Job shop, manual and CNC mix |
| $1M – $3M | 2.5x – 3.5x | CNC-heavy, some OEM contracts |
| $3M – $10M | 3.0x – 4.5x | ISO certified, production contracts, trained machinists |
| $10M+ | 4x–7x EBITDA | Precision manufacturing platforms, aerospace/defense |
Want to understand how these multiples work and what EBITDA vs. SDE means for your business? Read our full guide: How Service Businesses Are Valued.
What Drives Your Number Up (or Down)
Two Machine Shops businesses with the same revenue can be worth very different amounts. Here are the factors that separate high-multiple from low-multiple businesses:
Drives Multiple Up
- ISO 9001 or AS9100 certification — quality certifications required by OEMs and defense contractors
- Long-term OEM supply contracts — recurring production work with volume commitments
- Modern CNC equipment — multi-axis machines with current technology and capacity
- Trained machinists with tenure — skilled operators who don't walk out the door at closing
- Specialty capabilities — tight-tolerance, exotic materials, or industry-specific expertise
Drives Multiple Down
- Job shop with no contracts — custom work priced per quote with no forward visibility
- Owner is the lead machinist — all programming and setup depends on one person
- Aging manual equipment — bridgeports and manual lathes with limited CNC capacity
- Single-customer dependency — one OEM provides 40%+ of revenue
- No quality certifications — limits the customer base to less demanding work
If you’re not sure where you stand on these factors, our Exit Readiness Assessment scores you across all of them in about 3 minutes.
Frequently Asked Questions
What is the average machine shop worth?
Machine shops typically sell for 2.5x to 4.5x their Seller's Discretionary Earnings (SDE). For a shop with $300K in SDE, that translates to an estimated value of $750K to $1.35M. ISO-certified production shops with OEM contracts and modern CNC equipment trade at the higher end.
What SDE multiples do machine shops trade at?
Based on recent transaction data, machine shops trade at SDE multiples of 2.5x to 4.5x. Larger shops valued on EBITDA trade at 4x to 7x. Quality certifications and production contracts are the primary differentiators.
How can I increase the value of my machine shop before selling?
Obtain ISO 9001 or AS9100 certification, secure long-term production contracts with OEMs, invest in modern multi-axis CNC equipment, retain trained machinists with competitive compensation and agreements, and reduce your personal involvement in programming and setup.
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