Is this business worth buying?

Business deal profitability analysis

Most people evaluating a business acquisition start with the wrong question. They ask what the business is worth. The better question is whether this deal, at this price, with this financing, puts money in your pocket and survives a bad year. Those are different questions and they have different answers.

This platform models both. It values the business against the multiple range for its sector, then runs the deal as a lender and a buyer would: how much cash you need at closing, whether operating cash flow covers the loan payments, what return you earn on the money you actually invested, how far revenue can fall before coverage breaks, and what the whole thing is worth when you sell it.

The ten questions this answers

1. Is this business worth buying? — a weighted score across coverage, return, price and business quality
2. How profitable is the deal? — cash to the buyer after debt service, capex and tax
3. How much cash will I need? — down payment, closing costs and the working capital you leave behind
4. What will my ROI be? — year-one cash-on-cash return and multi-year IRR
5. Can the business support the debt? — DSCR against the 1.25× lender threshold
6. What is the ideal offer price? — the maximum price that still clears your targets
7. What happens if revenue decreases? — the revenue cushion and five stress scenarios
8. How does the deal compare to the industry? — the multiple paid against the sector band
9. What are the biggest risks? — concentration, owner dependence, recurring revenue and trend
10. What is the expected return under different scenarios? — a two-variable sensitivity grid

How small businesses are priced

Owner-operated businesses are valued as a multiple of Seller's Discretionary Earnings — net profit plus the owner's salary, perks, interest, depreciation and genuine one-time costs. A typical main-street business trades between 2× and 4× SDE. Where it lands inside that range depends on how transferable it is: recurring contracts, a diversified customer base, a team that runs the business without the owner, and documented systems all push a business toward the top of its band. Owner dependence, customer concentration and a declining trend push it to the bottom.

Larger businesses shift to EBITDA, which does not add back an owner's salary because a market-rate manager is already on the payroll. The crossover is usually somewhere around $1M of earnings.

Why structure matters as much as price

Two buyers can pay the same price for the same business and get completely different outcomes. More cash down means lower debt service and a safer DSCR, but a lower return on your capital. A larger seller note usually costs less than bank debt and keeps the seller invested in a clean transition. A longer amortization lowers the annual payment and raises coverage, at the cost of more total interest. The Deal Analyzer lets you move each of these and watch the tradeoff happen.