07/08/2025
I follow B. Lane Carrick a SMU Instructor because he is great. Here is a recent LinkedIn post for everyone to consider. Mr. Carrick has a very good & informative Podcast as well on YouTube called The Deal Table. Check it out and this analysis below. https://www.youtube.com/
A buyer is looking for a 25 to 50% annual return on their capital when they invest in a small business.
Think about it this way.
If they can earn 5% risk-free from Treasury bills and 10 to 12% from public stocks they can sell anytime, what kind of return do you think they require from an illiquid, privately-owned operating business?
Much more.
When you factor in economic uncertainty, interest rate risk, shifting customer demand, and the reality that the business might collapse if the owner gets sick or steps away, the expected return climbs fast.
This is why 95% of businesses sell for 2 to 4 times earnings.
A business selling for 4x earnings is delivering a 25% return to the buyer.
At 2x? That’s a 50% return.
And that’s assuming those earnings are stable and repeatable. If there’s doubt about their consistency, the buyer’s perceived risk increases, and the multiple drops further.
Math isn’t personal. It’s objective and rational.
The riskier your business appears, the higher the return buyers will demand. The higher the return they demand, the lower the multiple you’ll receive.
But here’s the opportunity: reduce the risk, increase your multiple.
I recently told a client whose business we valued at $3.5 million that they needed to triple their earnings to achieve their $12 million exit target. Rather than take them to market with unrealistic expectations, we connected them with specialists to help build the systems and processes that could support a higher valuation.
Two years of focused effort, reducing owner dependence, cleaning up
financials, and building transferable value, can shift you from the low end to the high end of that 2x to 4x range.
That’s how you take control of your exit.
The Deal Table is dedicated to providing entrepreneurs, executives, and investors with actionable insights on how to build, scale, and successfully exit businesses. Lane Carrick, an experienced business executive, and Ryan Harper, a hands-on advocate for entrepreneurs, engage in high-level conversat...
