How to Know If You're Getting a Fair Offer

Calculate your business value using multiples, DCF analysis, and market comparables to evaluate acquisition offers objectively.

1. Calculate your trailing twelve months revenue and EBITDA. Pull your last 12 months of revenue and calculate EBITDA (earnings before interest, taxes, depreciation, amortization). Clean up any one-time expenses or owner perks that inflate costs. Most buyers will normalize these numbers anyway.
2. Apply industry revenue and EBITDA multiples. Small businesses typically sell for 0.5-3x revenue or 2-6x EBITDA, depending on industry and growth rate. SaaS businesses command higher multiples (3-8x revenue). Service businesses with recurring contracts get 1-3x revenue. Apply your industry's range to get a valuation bracket.
3. Run a discounted cash flow analysis. Project your next 5 years of free cash flow. Apply a discount rate of 15-25% for small businesses to account for risk. Sum the present value of those cash flows plus a terminal value. This gives you an intrinsic value floor.
4. Research comparable sales in your market. Look for businesses sold in your industry, size range, and geography within the last 2 years. Business brokers, industry associations, and M&A databases publish this data. Adjust for differences in growth rate, margins, and market position.
5. Factor in your strategic value and deal terms. Add 10-30% if you have unique assets, customer relationships, or market position the buyer needs. Subtract 10-20% if you need to sell quickly or have declining metrics. Consider earnouts, escrow periods, and payment terms in your evaluation.
6. Set your acceptance range before negotiations. Calculate the weighted average of your three valuations. Accept offers within 10% below this number. Negotiate hard between 10-20% below. Walk away from anything more than 20% under your calculated value unless you have compelling personal reasons.