What buyers actually pay for
Two businesses with identical profit routinely sell for very different money. The difference is almost never the profit.
Ask an owner what their business is worth and they will tell you what it earns. Ask a buyer and they will tell you how confident they are that it keeps earning after the owner leaves.
That gap is the whole negotiation.
Confidence is the product
A buyer paying four times earnings is saying they expect to get their money back in four years, with risk. Everything that reduces the risk moves the multiple: contracted revenue instead of repeat goodwill, a management team instead of a founder, records that reconcile in an afternoon instead of a fortnight.
None of those things change last year’s profit. All of them change the price.
Where owners lose money
Most value is lost before the negotiation, in three places. Earnings that cannot be verified quickly. An operation that stops without the owner. And going to market with one interested party rather than several.
The last of those is the one owners most often walk into voluntarily, because the approach felt like good luck.
The useful question
Not what is my business worth. Rather: if I stopped answering the phone tomorrow, what breaks in the first three months. Whatever the answer is, that is the work, and it is worth more than a year of trading growth.
Thinking about selling in the next two years?
A confidential 30 minute call. We tell you what your business is likely worth and what to fix first.