Profit Sets the Price, Not Sales
Two Florida companies can each bill $4 million a year and sell for very different amounts. One keeps $700,000 of it. The other keeps $180,000. Buyers pay for what the company keeps.
That is why a broker's first request is three years of tax returns and profit and loss statements. Those documents are the base for everything after.
SDE for Owner Run Companies
Under about $2 million in price, buyers usually measure seller's discretionary earnings, or SDE. The question is simple. What could one full time owner take home?
The math starts with the net profit on your tax return and adds back costs a new owner would not carry the same way:
- Your salary and the payroll taxes on it
- Health insurance and retirement money for you
- Interest and depreciation
- Personal costs the company paid, such as a family vehicle
- Costs that truly will not repeat
Addbacks need receipts
A buyer's accountant will ask for support on every addback. A repair that happens every year is not a one time cost, however it felt when you paid it.
Income gets the same scrutiny. Cash from selling an old truck is not operating profit, and cash that never reached the books cannot be proven, so it adds nothing to value.
EBITDA for Larger Companies
Once a hired manager runs the company, buyers look at EBITDA: earnings before interest, taxes, depreciation and amortization, after paying everyone a fair wage, including whoever is in charge.
Private equity groups often start paying attention around $750,000 to $1 million of EBITDA, sometimes lower for a strong company. Their offers may tie part of the price to future results.
The Multiple Is a Risk Score
Buyers multiply that profit by a number. Many established companies trade around two to three times yearly cash flow. A lower number says the buyer sees risk. A higher one says the profit looks safe.
Waiting rarely helps. Multiples move slowly, so a year of waiting usually changes the price only if the profit changes.
Florida Details Buyers Price In
Buyers and their lenders ask questions that reflect where the company sits:
- Windstorm and flood coverage, deductibles and the claims history
- Whether the lease allows reopening after storm damage
- How much revenue lands in the winter months, and how steady it is
- Licenses that must be held by a named qualifier, such as a contractor
- How many staff are seasonal, and how they are paid
Good answers shorten diligence. Vague ones lead to a lower offer or a longer holdback of part of your price.
A holdback is real money. Florida's sales tax rules let a buyer keep part of the price until the state confirms what you owe, as explained in Florida sales tax successor liability when you sell a business.
Real Estate and the Lease
A company that pays below market rent looks cheaper to run than it is, because buyers price at market rent. A month to month lease worries lenders. Check both before a buyer does.
If you own the building, the property may be worth its own sale or a lease to the buyer. Treat it as a separate asset with a separate price.
How the Price Gets Paid
A price is not the same as cash at closing. Many deals include a bank or SBA loan, a note from the seller, or a payment tied to later results. Two offers with the same headline number can be worth very different amounts.
Seller notes carry their own Florida tax, covered in Florida documentary stamp tax on a seller financed note. Ask a broker to compare offers by what you actually receive and when.
What to Do With This
Start with your last three tax returns and estimate your own SDE.
Then read the Florida business sale roadmap for the order of steps, and getting a Florida company ready to sell to see what to fix first. When you want a real range, send the form or call (305) 555-0147.