How We Explain a Price to an Owner

Most owners who sell a business only do it once. Many of them get a letter from a buyer with a number on it and very little else. They are left to guess how the number was reached and whether it is fair.

We do it differently. When Creek Equity makes an offer, we walk the owner through how we got there, line by line, before anything is signed.

What we show

The earnings figure we started from. Usually adjusted EBITDA for the last three years, and the trend across them.

Every adjustment we made. The add-backs we accepted, the ones we did not, and why. If we deducted something, such as the cost of replacing work the owner does for free, we say so and show the figure.

The multiple, and what drove it. How much the business depends on the owner, customer concentration, recurring revenue, the trend and the quality of the records. If one of those held the multiple down, we tell the owner which one, so they know what it would take to change it.

The terms, not only the price. How much is paid at closing, whether any of it is deferred, and what happens to the employees, the name and the owner's role.

Why we do it this way

We buy founder-led and family-owned Michigan businesses and hold them for the long term. That usually means working alongside the owner and the management team after closing. A relationship that starts with a number nobody can explain is a poor start.

An owner who understands the offer can also compare it fairly with others. We are comfortable with that.

Read more

Scott Zack explains the full picture in How a Buyer Values a Small Business: where the earnings number comes from, how buyers think about multiples, and the five things that move them.

If you own a Michigan business and want to understand what a buyer would see, contact us or write to [email protected]. The first conversation is with Scott directly.