Normalizing the numbers
Owner salary above or below market, personal expenses run through the business, one-time costs and related-party rent all get adjusted before a multiple is applied. Buyer and seller frequently disagree here more than on the multiple itself.
What moves the multiple
Recurring revenue, a management team that stays, diversified customers and clean books raise it. Customer concentration, regulatory exposure, declining trends and owner dependence lower it.
Working capital
A deal usually assumes a normal level of working capital comes with the business. Leaving this undefined until closing is a common source of last-minute disputes.