FAQ About Buying

What is a fair price for a business?
Like any other product, a business is worth whatever a willing buyer will pay a seller in a free market. However, the value of most businesses is directly related to cash flow and varies with the capital structure of the transaction. Price may also vary with the industry, the value of the assets, future growth, and the type of buyer, either strategic or financial.

What is Goodwill?
Goodwill is the difference between the total value of a business and the value of inventory, equipment and other "hard" assets.

What is Discretionary Earnings vs. EBITDA?
Discretionary earnings are usually defined as profit before income tax, depreciation, interest and owner's compensation and other owner benefits. Discretionary Earnings is the amount of money the owner has available to pay himself or an operator, to invest in additional equipment, to make the debt payments on the business, and pay taxes. Discretionary Earnings are representative of a business still dependent on the owner. It may have the beginning management structure and is typically ready to move to the next level with proper capital and guidance. EBITDA is the earnings measure used for larger companies both private and public. These companies, when private, typically have a management structure and can operate successfully under outside ownership.