Put in the seller's numbers. See what you'd really be paying, as a multiple of what the business earns.
From the sales particulars and the latest accounts. Nothing is saved.
Put in the asking price and the profit, and the result appears here as you type.
The profit in a small company's accounts is rarely what the business earns for a new owner. The seller pays themselves through it, runs a car and a phone through it, and books one-off costs that won't come back. Add-backs put those back, so you see the earnings you'd actually be buying.
They're also where sellers stretch the truth. Every add-back should be one you could explain to a lender, line by line. If you can't, leave it out.
An asking price tells you nothing on its own. Divide it by what the business earns and you get the multiple: how many years of earnings you're paying for up front. The same business can look reasonable on adjusted earnings and expensive on filed profit, which is why the checker shows both, side by side.
Sellers and their brokers quote the flattering one. Your lender, and anyone you sell to later, will look hard at the other. If the price only makes sense once every add-back is accepted, you've found the conversation to have before you make an offer.
Most small acquisitions are paid for partly with borrowed money and partly with payments to the seller over time. Those payments come out of the profit every year.The risk ratio is adjusted earnings divided by the annual cost of the financing. At 1.5 or above there's room for a bad year; much below that, one quiet quarter and the payments get hard.
A low ratio isn't always the end of the deal. More of the price deferred, a longer loan, or a bigger slice of seller finance can all bring the yearly cost down without changing the price. Try a different structure in step 2 and watch the colour move.
Is what I type saved?
No. The figures stay in your browser while you work. If you ask for the full result, they're used to build your PDF and email, then dropped: we keep your name and email address, not your numbers. The only exception is if you choose to open the deal in Deal HQ, which is what that button is for.
What multiple should I pay?
It depends on the business, its sector and how much of the profit leaves with the current owner. Agree the adjusted earnings first, then the multiple. A price argued before either is a number nobody has justified.
Where do the sums come from?
The same valuation modeller as Deal HQ, built from the spreadsheet used on 50+ completed acquisitions. A result you open in Deal HQ shows exactly the same figures.
Do I need an account?
No. The instant result needs nothing at all. The full result, with the debt-cover check and the PDF, needs a first name and an email address.
Is this financial advice?
No. It's an indicative calculation, and the figures are only as good as the numbers you put in. Take your own advice before you buy a business.
Ready to run the whole deal? Deal HQ holds every year of accounts, the full structure, diligence and a data room, from £49 a month.