Low Offers with Earnouts based on Increases in Revenue
When someone comes in with a low upfront offer with a tier based earnout, we respond in kind with gratitude but a quick response.
We appreciate the efforts.
But the reality is we communicate succinctly that the seller won’t let it go for the offer.
And when breaking it down it’s all about what it takes to get a deal done.
Which is a matter of understanding the true valuation and the multiple of EBITDA.
If they are offering less than a reasonable multiple based on the current status the offer should be rejected unless the seller needs to get our.
If the offer goes up to a more realistic multiple but only if the business grows substantially, in some cases a multiplier of more EBITDA production, then the buyer needs to be brought to reality here.
If the business does 3x more production for instance, and the value is $5mm it will be worth $5mm not $5mm. Let’s understand this piece to it. Growing the business will result in a higher valuation. That’s not baked in to any deal and winning a seller over.
Enclosed are some valuations to consider but these are a bit higher than what takes place on the street.
You want to offer a solid offer in cash upfront.
Many businesses we list are not being let go for anything near under a reasonable multiple of EBITDA.
The buyer can flip the business tomorrow if the seller were to.
Be more strategic with your earnout terms.
If the business grows 3x, the business should be worth 3x of a normal valuation based on what it is being valued at now.
You can have revenue milestones, but EBITDA is something generally viewed negatively by the seller’s broker and seller, because you can simply squeeze the seller out of with just hiring a consultant or two.
We want you to secure the business you want, as opposed to just squeezing a good deal out of something that’s a maybe.
You want a good LOI to help you. Happy to discuss on a call. Thanks.
Please reach out to us if you have any questions relating to acquisitions:
Email – [email protected]
Phone – (800) 773-1523
Simply engage us below to get started whether it comes to bringing you qualified buyers where we list your business for maximal value or engaging us to bring qualified and vetted businesses that match your exact target criteria such as industry and EBITDA multiple if you are buying a business:
Buyer-Side Engagement – Retain Us to Provide you with Qualified and Vetted Businesses that Match Your Target Criteria
Seller-Side Engagement – Retain Us to List Your Business and Bring Legitimate Buyers to the Table
Leader in Acquisitions with Expertise in Representing Sellers & Buyers on Deals
Jarbly is a leader in acquisitions with expertise in helping with listings, negotiations, LOI's, asset purchases, company purchases, and real estate purchases. JARBLY has access to high net worth individuals if you are on the sell-side and businesses that may be of interest to you if you are on the buy-side.
- Phone: (800) 773-1523
- Email: [email protected]