Great question! You should be asking this question of every seller or broker because people set prices differently. Other good questions are “What does the price include?” and “What is unique about this business that will bring value to me?” Answers may vary widely. Understanding price can be a signficant challenge for buyers, especially if an opportunity is listed at “Market Price” instead of a number.
If the seller or listing broker is able to give reasonable explanation for recasting the financials to arrive at SDE or EBITDA, provide rationale for the multiple of earnings, can give comps of sold businesses yielding similar deal ratios, and has reached out to lenders for their input prior to listing the business for sale, these are reasons to give the opportunity further consideration. Even so, it is up to the buyer to study the business independently and to reach a number that the seller will accept. The list price (if there is one) is the seller’s offer to sell, but the buyer needs to establish their own number in an offer to purchase. If buyers and sellers are too far apart in price, no deal is struck.
Buyers often hire a broker to help them navigate deal complexity, understand the true potential of the business, and to help buyers understand both price and value when considering an opportunity. Contact Thrive Acquisition if you’re ready to work with a broker for your next acquisition.