How Buyers Decide What Your Business Is Worth

Understanding what your business is worth starts with how buyers evaluate cash flow, consistency, and risk. In this Kaizen Time episode, Eric Joern explains how EBITDA, seller’s discretionary cash flow, and multipliers factor into a buyer’s offer and why deals ultimately come down to what a bank is willing to underwrite. You will learn what strengthens or weakens your valuation, how to prepare years before you sell, and how to get a realistic ballpark number for your business.

Key Takeaways

• Buyers look first at how much reliable cash flow a business produces.
• Multipliers rise when a business has strong systems, predictable performance, and clean financials.
• Seller’s discretionary cash flow often provides a clearer picture for small business valuations than EBITDA.
• Owner perks, family wages, and one-time expenses need to be normalized before calculating value.
• Private equity activity has pushed valuations higher in industries with stable recurring work.
• A bank’s willingness to underwrite the loan ultimately determines what a deal can support.
• Business owners who prepare years in advance can meaningfully increase the value of their business.