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Is This Business Worth Buying? 12 Numbers to Check Before Making an Offer

A concise buyer scorecard for deciding whether a business deserves an offer, renegotiation, or a hard pass.


Business-sale graphic with a thoughtful man, a clipboard scorecard, and bold text: Is This Business Worth Buying? 12 numbers to check

Most buyers waste months on the wrong deals.


Not bad deals, necessarily — just wrong ones. Deals that were never financeable, never structurally sound, or never going to survive the first serious lender conversation. They spend weeks on calls with brokers, sign NDAs, request financials, model out projections — and then get crushed when underwriting hits, or when they actually look at the bank statements behind those beautiful broker teasers.


The question "is this business worth buying?" sounds simple. It's not. Because the answer isn't just about the business. It's about whether the numbers can hold a deal structure, whether the cash flow can service debt, and whether what you're buying resembles what's being sold.


Here's the scorecard that cuts through the fog before you waste another month.



Why Buyers Get Burned Before They Ever Close


The most common mistake isn't bad negotiation or overpaying on a multiple. It's shopping too late in the process.


Buyers find a listing, fall in love with the revenue number, and spend four to six weeks getting emotionally invested before anyone stops to ask: can this deal even be financed?


By then, they've already mentally moved in. They've named the dog, redesigned the website, and told their spouse they're buying a business. That emotional debt is expensive. It makes people rationalize bad numbers, ignore red flags, and push deals forward that should have been killed at first contact.


The fix is simple: run the numbers first. Not to kill every deal — but to know what you're actually dealing with before you spend time and money finding out the hard way.


Business sale thumbnail with man studying a glowing deal scorecard, files, and a warning; text says BUY OR PASS? 12 CRITICAL NUMBERS

The 12 Numbers That Tell You Whether to Make an Offer


These aren't the only numbers in a diligence process. They're the pre-offer filters — the ones that tell you whether a deal is worth taking seriously at all.


1. Seller's Discretionary Earnings (SDE)


This is the engine. Everything runs on it. SDE is what the business actually puts in the owner's pocket when you strip out taxes, depreciation, amortization, and owner-specific expenses.


What to ask yourself: Is the SDE number based on tax returns, or is it a broker calculation inflated with addbacks? There's a big difference.

2. Adjusted SDE (After Addback Scrutiny)


Not all addbacks are created equal. Personal cell phone? Fine. Owner's personal vacation charged to the business? Fine, take it back. A one-time "anomaly" that shows up three years in a row? That's not an addback. That's just a cost of running the business.


Run your own adjusted number. Cut the soft addbacks. See what the SDE looks like when you're conservative.

3. Debt Service Coverage Ratio (DSCR)


Take your adjusted SDE. Subtract a realistic market-rate salary for yourself as the operator. Whatever's left has to cover your annual debt payments — and it needs to do it with room to breathe.


Lenders typically want 1.25x DSCR minimum. That means for every $1 of debt service, you need $1.25 in cash flow. If you're barely at 1.0x, you don't have a deal. You have a job with debt.


Quick filter: Multiply your projected annual debt payment by 1.25. If adjusted SDE minus your salary doesn't clear that number, this deal doesn't work at current pricing or structure.

4. Asking Price to SDE Multiple


Most SMB deals trade between 2.5x and 4.5x SDE depending on size, industry, and risk profile. Something pricing at 6x SDE for a $800K revenue service business needs a very compelling story — and it usually doesn't have one.


Know what the multiple is. Know what comparable deals trade at. Know what you're being asked to pay.


5. Revenue Trend (3-Year Direction)


Is revenue going up, flat, or quietly dying? A declining revenue trend that's "stabilizing" is one of the most dangerous phrases in a broker teaser. Get three years of P&Ls and look at the actual numbers, not the broker narrative.


Flat or declining revenue with stable SDE often means costs were cut to dress the business for sale. That's not always a death sentence — but you need to know it's happening.

6. Customer Concentration


If one customer represents more than 20% of revenue, you have a single-point-of-failure risk that lenders will flag and that could crater the business post-close. Find out who the top five customers are and what percentage of revenue each represents.


Pre-offer checklist item: Ask directly — what percentage of revenue comes from the top three customers?

7. Owner Dependency Score


How much of the business lives in the seller's head, relationships, or daily presence? This is harder to quantify, but you need to ask:


  • Are key customer relationships tied to the owner personally?

  • Is the owner the primary salesperson, estimator, or technical lead?

  • What happens to revenue if the owner leaves on Day 1?


High owner dependency = transition risk = lender hesitation = earnout pressure = your problem.


8. Working Capital Requirements


Does this business need a significant cash cushion to operate — for payroll, inventory, receivables float? What's the average accounts receivable balance? How fast does the business collect?


A business that closes at $0 working capital but needs $200K to operate without blinking is a hidden cash trap you'll find out about immediately post-close.


9. Capex History and Upcoming Requirements


What has the business spent on equipment, vehicles, or infrastructure over the past three years? What's likely to need replacement in the next two to three years?


Deferred maintenance on physical assets is one of the most common ways buyers get surprised after close. Ask for an equipment list with age and condition.

10. Seller's Real Motivation


This is a number in the behavioral sense. Ask: why is this person actually selling?


Retirement is fine. Health reasons are fine. Partnership dispute is worth understanding. "Pursuing other opportunities" from someone who's 45 and clearly loves the business is a flag. Sellers who are desperate or hiding something eventually show it — if you ask the right questions early.


11. Time-in-Business


A business that has been operating profitably for 10+ years under consistent conditions is a fundamentally different risk profile than one that exploded in 2021 during an anomalous market cycle and is now trying to price on those peak numbers.


Lenders care about this. So should you.


12. Lender-Readiness Score


Before you make an offer, ask yourself: would an SBA lender or a conventional acquisition lender be excited about this deal? Or would they look at the industry, the concentration, the owner dependency, or the tax returns and immediately start backing away?


Deals that can't be financed conventionally aren't automatically dead — but they require more equity, more seller financing, or more creative structure. Know which situation you're in before you make the offer.

The Hard Truth About This Scorecard


Running these 12 numbers is not going to make every deal look bad. It's going to make most deals look exactly like what they are — ordinary businesses with real strengths and real risks that need honest structuring.


The buyers who win in SMB acquisitions are not the smartest people in the room. They're the most disciplined ones. They screen fast, they kill bad fits early, and they move decisively when the numbers actually hold.


The buyers who get smoked are the ones who mistake excitement for analysis, confuse revenue for cash flow, and let emotional investment do the work that math should be doing.


There's no secret to deal flow. There's no magic to financing. There's just execution, and execution starts with running the right numbers before you fall in love with a deal.


Run the Numbers Before You Run Your Mouth


Make this scorecard a habit. Before you have a second conversation with a broker, before you go under LOI, before you spend a dollar on legal or diligence — run these 12 filters.


If a deal survives them, it's worth your time. If it doesn't, you just saved yourself months and possibly a very expensive mistake.


Ready to pressure-test a deal you're looking at?

The Deal Reality Check worksheet gives you a structured way to run these numbers on any listing, so you can make an offer from a position of clarity — not hope.




FAQs — Is This Business Worth Buying?


What numbers should I check before buying a business?

Before making an offer, check these 12 core factors: Seller’s Discretionary Earnings (SDE), adjusted SDE after scrutinizing addbacks, Debt Service Coverage Ratio (DSCR), asking-price-to-SDE multiple, three-year revenue trend, customer concentration, owner dependency, working capital requirements, capital expenditure needs, the seller’s real motivation, time in business, and lender readiness. Together, they help you determine whether the deal deserves deeper diligence, renegotiation, or a pass.

Compare the asking price to SDE or EBITDA using the industry multiple for that type of business. If the seller is asking 5x SDE for a business in an industry where 2.5–3x is the norm, that's a red flag. Also check whether the financials actually support the number — many sellers inflate SDE by excluding real operating expenses.

SDE stands for Seller's Discretionary Earnings. It represents the total financial benefit a full-time owner-operator would receive from the business, including salary, profit, and discretionary add-backs. It's the most commonly used metric to value small businesses and is the foundation for calculating the asking price multiple.

It depends on the industry, but generally a gross margin above 40–50% gives a small business enough cushion to cover overhead, debt service, and your salary. Service businesses often run higher. Product or distribution businesses often run lower. The more important number is the net margin after all real operating expenses — not the seller-adjusted version.

Ask what happens if the current owner disappears tomorrow. Does revenue drop? Do key clients leave? Do employees lose confidence? If the answer to any of these is yes, the business has owner dependency risk. Look for documented processes, transferable client relationships, and a team that functions without constant owner involvement.

Customer concentration risk means a large portion of revenue comes from a small number of clients. If one customer represents more than 15–20% of total revenue, losing that client after the sale could be catastrophic. Always ask for a customer revenue breakdown and look for any contracts, renewal terms, or relationships tied directly to the current owner.

Pull at least three years of revenue data, ideally five. Look for consistent growth, stable plateaus, or declining trends — and find out why the trend is what it is. A business with declining revenue needs a clear explanation and a credible turnaround thesis. Temporary dips due to COVID or a one-time event are different from structural decline.

Not without verification. Ask for tax returns, bank statements, and profit & loss statements for at least three years, and cross-reference them against each other. If the seller's books don't match the tax returns, that's a serious red flag. Always engage a CPA experienced in M&A to review financials before you make an offer or go deep into diligence.

Most Main Street businesses (under $1M SDE) sell for 2–4x SDE. Lower-end multiples apply to riskier businesses with owner dependency, declining revenue, or single-industry exposure. Higher multiples apply to recurring revenue, scalable models, and strong management teams. Anything above 4x for a small business demands a compelling justification.

Working capital is the cash needed to run the business day-to-day — inventory, receivables, payables, and payroll. Some businesses are cash-flow-negative for 30–90 days after purchase before collections catch up. Make sure the deal includes enough working capital in the purchase, and understand exactly how much cash you'll need on hand to keep the business running from day one.



Try These AI Deal-Analysis Agents


The Business Buyer’s Blueprint

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Is This a Good Deal?

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Deal Scorecard GPT

Best for a more structured, objective scorecard approach—especially micro-acquisitions. Its source says it analyzes micro-acquisition deals and grades them with objective scorecards, with use cases spanning deal analysis, due-diligence scoring, funding evaluation, and market research.



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