A listing's earnings usually include add-backs. Test each one the way a careful lender would, account for costs the listing may leave out, and see the earnings you can actually build a deal on.
Please read: educational estimates only. This tool is not investment, accounting, legal or tax advice. It is for educational and illustrative purposes only, and its suggestions are general guidance that lenders apply differently. When we suggest a haircut, the percent is yours to set: apply a reasonable reduction based on your own market research and the factors unique to your target market. Always verify add-backs and adjustments with your own CPA, attorney and broker. All final decisions, including the price you pay, are solely your responsibility.
1. The listing
The earnings figure on the listing or offering memo, add-backs included.
Lets us restate the multiple on verified earnings.
2. The add-backs
The starting rows are example entries, including their haircut percents, to show how the tool works. They are not recommendations. Replace them with your own.
Enter each add-back the seller included in the stated figure. We suggest accept, haircut or reject based on the type and the evidence behind it. You can change any decision. For a haircut, enter your own percent: apply a reasonable reduction based on your own market research and the factors unique to your target market.
3. Costs the listing may leave out
Enter yearly amounts for anything that applies. Leave at 0 if it doesn't.
If you'll hire someone to do the seller's job. If you'll run it yourself, leave this at 0 and enter your salary in the max-price calculator instead, so it isn't counted twice.
The extra rent you'd pay over what the books show today.
Equipment or repairs the seller put off, spread per year.
Earnings boosted by slow-paying vendors or pulled-forward sales, for example.
Coverage or employee benefits a new owner will need to add or reprice.