Check Transferable Earnings Before Setting a Price

Begin with the filed numbers

Buyers pay for earnings they can support, not the amount an owner hopes to receive. Start with tax returns, current statements and reconciled bank activity.

Explain unusual expenses in a separate schedule. A personal cost or a genuine one time expense needs evidence before a buyer will accept it as an adjustment.

Price the work the owner performs

Seller discretionary earnings and adjusted EBITDA answer different questions. An owner operated company may be assessed around one working owner; a managed company needs a fair management cost.

Do not remove your salary and also omit the replacement for your work. Identify the duties, hours and staffing cost that would remain after you leave.

Depreciation does not eliminate the need to replace equipment. Review maintenance and future capital needs rather than treating every noncash expense as spendable money.

Explain why the earnings can continue

Customer concentration, cancelable contracts and an insecure lease can affect how much a buyer is willing to pay. Address the evidence before debating a multiple.

A supported opinion of value is a starting point for marketing and negotiations. It is not a guarantee that a particular buyer or lender will accept the same figure.