Most founders find out they left money on the table after the deal is done. By then, it's too late to change anything.
Where this fits
Demand → Pricing → Cash → EBITDA → Network → Visibility → Value
The most dangerous moment in a business sale is not when the offer is too low. It is when the offer feels about right — and you have no independent way to know whether it is.
Most owners receive one or two offers in their lifetime. The buyers they are dealing with have completed dozens of transactions. That gap in experience is where value gets lost — not through dishonesty, but through information asymmetry.
A fair price is not simply the number someone is willing to pay. It is the number your business would achieve in a competitive, well-prepared process with accurate information on both sides. Those conditions rarely exist by default. They have to be created.
In most private equity and trade sale transactions, businesses are valued using an EBITDA multiple. Your earnings — adjusted for items that are not representative of ongoing performance — are multiplied by a number that reflects the risk and attractiveness of the business.
What this means in practice: the offer price divided by adjusted earnings. A 6x offer on $2m EBITDA is a $12m headline price — but the net proceeds depend on working capital, debt, and deal structure.
What this means in practice: assessed at settlement against a normalised level. If your debtors are high or inventory heavy at the time of completion, this reduces your net proceeds — sometimes materially.
In plain terms: EBITDA is your business earnings from operations, before financing costs, tax, and depreciation. Think of it as what the business earns as a going concern, stripped of your accounting decisions. Multiply this by the relevant industry multiple and you have the enterprise value — the headline price.
The multiple varies. A stable, growing business with diversified customers and clean financials might achieve seven to nine times EBITDA. A business with customer concentration, owner dependency, or inconsistent margin might achieve four to six times. The difference between these outcomes — on the same earnings figure — is enormous.
Understanding where your business sits in that range requires honest assessment. Most owners have a view on what their business should be worth. That view is often based on what they need to retire, or what they have heard about comparable deals, rather than what the business would actually achieve in a structured process.
Three things determine whether you achieve a fair price: knowing what the business is worth before you start, running a process that creates competitive tension, and presenting the business in a way that allows a buyer to properly underwrite the value that is there.
What this means for you:
Most founders don’t see this clearly until they’re already in a process.
If you want to talk it through properly before that, we can do that.
→ Discuss your situationBuilt by an operator who has scaled and exited businesses across private equity, listed and private environments. View track record →
Built on real operating and private equity metrics — not generic multiples.
Used by founders and operators preparing for growth, capital or exit.
Start valuation →Do you know what actually drives your valuation?
What they say:
Enterprise value
What it means:
The total value of the business before adjusting for debt or cash. This is the headline number expressed as an EBITDA multiple. Your actual proceeds — what you receive — depend on the net position: enterprise value minus debt plus cash at settlement.
What they say:
Equity value
What it means:
What you actually receive. Enterprise value adjusted for the cash and debt in the business at settlement. If the business carries debt or has a working capital deficit, this number will be lower than the headline. Many sellers are surprised by how much lower.
What they say:
Earn-out
What it means:
A portion of the purchase price that is only paid if the business hits future performance targets after the sale. Buyers use earn-outs to reduce their risk. The risk for sellers is that you do not control the business post-sale — and the targets may be set in ways that are difficult to achieve under the new ownership model.
In plain terms: An earn-out means part of your payment is deferred and conditional. You receive it only if the business hits agreed targets — for revenue, profit, or other metrics — in the years after the sale. If the buyer changes the business in ways that make those targets harder to hit, you bear that risk.
What they say:
Completion accounts
What it means:
The financial statements prepared at the time of settlement to determine the final working capital position. This is where late surprises in net proceeds often occur, particularly around debtor quality, inventory valuation, and creditor terms.
What this means in practice: understanding your own valuation — properly adjusted — before any buyer presents theirs is the only way to negotiate from an informed position rather than reacting to someone else's number.
What they say:
Representations and warranties
What it means:
Contractual statements you make confirming the business is as described. If something surfaces post-sale that contradicts these statements, you can be liable. Understanding exactly what you are warranting — and what is excluded — is critical before signing.
What they say:
Locked box mechanism
What it means:
A deal structure where the price is fixed at a historical balance sheet date rather than being adjusted at completion. It gives the seller more certainty on proceeds but requires the business position to be accurately stated at that date.
This is usually where things get misread.
Sellers assume the offer reflects fair value because the buyer has framed it as market-based. Without an independent view, you have no way to test that claim. Start here.
→ Discuss your situationMost founders misjudge valuation. Get clarity in minutes using a structured commercial model built from 25 years of P&L accountability across industrial and distribution businesses.
Start valuation →The conditions for a fair outcome have to be created — they don't exist by default in a bilateral negotiation. If you want to understand what creating them looks like in your situation, it's worth talking through.
→ Discuss your situationTwo nearly identical businesses in the same sector sold within six months of each other. Both had revenue around $18 million. Both had EBITDA in the range of $2.4 to $2.6 million. Both had been approached by the same private equity group.
The first owner engaged directly with the initial approach, shared financials quickly, and negotiated bilaterally. The second owner took six months to prepare, engaged an independent advisor, and ran a competitive process with multiple interested parties.
The first seller's business had the same fundamental quality, but the buyer had no competition and no urgency. The second seller's business was presented with quality-of-earnings analysis already completed, and two credible competing parties in the room.
The first sold at 5.2x EBITDA. The second sold at 7.1x. Same sector, same size, same buyer group — $3.5 million difference in outcome. The only variable was preparation and process.
What this means for you:
A business with structured, defensible pricing commands a higher multiple than one where margin is held together by relationships. Buyers model what happens to margin when the founder leaves. If the answer is unclear, they price that risk in.
Knowing what it costs to serve each part of the business — and being able to demonstrate that — reduces buyer uncertainty. Uncertainty is always discounted.
Volume and mix matter. A business growing in its highest-margin segments with diverse customers across a broad base is worth more than one with the same total revenue concentrated in a few relationships.
A cost base that is clearly mapped to revenue-generating activity is easier to model and easier to value. Overhead that has grown historically without clear justification creates risk in a buyer's forward model.
A fair price does not materialise by itself. It is the result of a process that creates competitive tension, accurate information, and a seller who knows what their business is worth before the conversation starts.
Competitive tension is the most powerful force in a business sale negotiation. When a buyer knows they are competing against another credible party, they move faster, price more aggressively, and are less likely to use due diligence findings to adjust terms.
What this means in practice: the process through which the buyer tests everything. If they find something you have not disclosed, they will use it to adjust the price. If you disclosed it, the adjustment is limited.
Accurate information means the financial and operational picture of the business is clear, documented, and consistent with what is being claimed. Gaps in information give a buyer grounds to discount. Closing those gaps before the process starts removes those grounds.
Knowing what your business is worth — independently, before any buyer tells you their view — is the baseline from which you negotiate. Without your own number, the buyer's number becomes the frame of reference for everything that follows.
What this means for you:
The starting point is understanding your normalised EBITDA and the range of multiples being paid in your sector. An independent valuation gives you a benchmark. Running a competitive process gives you a market result. Neither is optional if you want confidence in the outcome — relying on a single buyer's view means you have no way to test whether it is fair.
Multiples vary by sector, size, growth rate, and risk profile. Industrial distribution businesses typically trade in the 4 to 7 times range depending on quality. Manufacturing businesses vary similarly. The specific multiple you achieve depends on how well the business is presented and whether there is competitive tension in the process.
You can negotiate all aspects of a deal. But multiple negotiation is most effective when you have an alternative — a competing offer or a credible alternative to selling. Without that leverage, negotiation is limited to the terms of a single offer. The leverage comes from process, not from position.
Pay attention to how the targets are set, how performance is measured, and what control you retain over the business during the earn-out period. If the buyer can make decisions post-acquisition that reduce your ability to hit the targets — through new cost allocations, strategic pivots, or management changes — the earn-out is worth less than it appears.
Enterprise value is the gross transaction price. What you receive depends on the debt in the business at settlement, the working capital position, any adjustments agreed during due diligence, and the structure of the deal — cash at completion versus deferred or earn-out components. The net figure can be meaningfully lower than the headline.
Rarely. An unsolicited offer reflects what the buyer is willing to pay before any competitive tension exists. It is almost always lower than what a structured, competitive process would achieve — because the buyer has no reason to offer more when there is no competition.
This requires engaging multiple parties simultaneously — at least two or three credible buyers — even informally. Without genuine alternatives, a buyer knows they are the only game in town and prices accordingly. Running even a light process with multiple parties creates meaningfully different dynamics.
Almost never. A first offer reflects the buyer's starting position, not their ceiling. It also reflects the absence of competition. Before accepting any offer, understand whether a structured process with multiple parties would produce a materially different outcome. In most cases, it would.
If you want to work this through yourself
→ Run the diagnosticIf you’d rather get a clear view quickly
→ Discuss your situationIf you’re already being approached or thinking about a sale
→ Before You Say YesHow is business value calculated in a sale?
Using an EBITDA multiple. Your adjusted operating earnings are multiplied by a factor reflecting your sector, growth profile, and business quality. The net proceeds you receive depend on that headline number minus debt, plus or minus the working capital position at settlement.
What is a fair multiple for my type of business?
Industrial distribution and manufacturing businesses typically trade in the 4 to 7 times EBITDA range depending on quality, size, and market conditions. The specific multiple you achieve depends on how well the business is presented and whether there is competitive tension in the process.
Why is an unsolicited offer likely to be below fair value?
Because the buyer has no competition. An unsolicited offer reflects what they are prepared to pay without pressure. A structured process with multiple interested parties consistently produces higher outcomes than bilateral negotiation with a single buyer.
What is an earn-out and when should I accept one?
An earn-out is a deferred payment contingent on the business hitting future performance targets. Buyers use them to reduce risk. They are appropriate when the forward earnings case is strong and you retain meaningful control during the earn-out period. They become problematic when the buyer controls decisions that affect your ability to hit targets.
How do I get an independent view of what my business is worth?
Run the EBITDA valuation tool to get a structured view of your business position. That gives you a baseline before any buyer presents their view — and a reference point for assessing whether what you are offered is actually fair.
Built by an operator who has scaled and exited businesses across private equity, listed and private environments. View track record →
Built on real operating and private equity metrics — not generic multiples.
Used by founders and operators preparing for growth, capital or exit.
Start valuation →See also: EBITDA Valuation Tool · Working Capital to Cash
This perspective is based on operating and scaling businesses across manufacturing, distribution and industrial sectors, including private equity-backed environments.