How do I decide what to offer for a business?

Deciding what to offer isn’t a single calculation — it’s the output of verified financial information, an understanding of comparable transactions, and a hard look at what financing you can actually secure. Buyers who jump straight to a number based on the seller’s asking price often overpay or lose a deal they could have structured differently.

Start from verified earnings, not reported earnings

Before attaching a number to a business, confirm which of the seller’s add-backs and adjustments are actually documented, since unverified add-backs shouldn’t factor into how much you’re willing to pay. A conservative view of true discretionary earnings gives you a more defensible starting point than the seller’s own summary.

Look at how similar businesses have sold

Pricing for small businesses is usually expressed as a multiple of earnings that varies by industry, size, and growth trend, and a broker or accountant familiar with your sector can give context for where a business should fall. Two businesses with similar revenue can be worth very different amounts depending on customer concentration, lease terms, and how much the business depends on the current owner.

Check what your financing will actually support

Your offer needs to work with realistic financing, not just what a seller is asking, so run the numbers on debt service coverage and your available down payment before you commit to a price. A price that looks fair on paper but that a lender won’t finance isn’t a workable offer, no matter how it compares to the market.

Structure, not just price, shapes the outcome

• A vendor take-back or an earn-out can bridge a gap in price expectations without requiring more cash upfront.
• Holdbacks and indemnity terms affect the real economics of a deal as much as the headline number does.
• Conditions like financing approval or a satisfactory due diligence period protect you if new information changes the picture.