If you caught this week's video, you know the big idea: the asking price on a business isn't a fact about the business. It's an opening move — built on what the seller wants, a lazy rule of thumb, or a negotiating anchor. Value is something you build yourself, from the earnings and the risk.
So here's the companion skill the video didn't have room for. Once you've got your own number, the gap between it and the asking price becomes one of the most useful signals in the whole deal. It tells you almost nothing about the business — but a lot about the seller. Learn to read it.
The small gap. Your number and theirs are close. That's a seller who priced realistically — often one whose broker told them the truth. These deals tend to be workable. Move.
The big gap, for emotional reasons. You ask why it's so high and you get "I need that to retire," or "that's what I've got in it." That's an anchored seller — not necessarily an unreachable one. The number is about them, not the business. Your job is to find out how motivated they actually are, because motivation, not the sticker, decides whether this closes.
The big gap, "that's just the multiple." The price is a rule of thumb somebody slapped on without adjusting for this specific business. That's not a bad seller — it's an uninformed one, or a broker-driven number. Sometimes educable, sometimes not. Either way, don't argue the multiple; bring your evidence.
The suspiciously low ask. A price that looks too good is a question, not a gift. Motivated seller? Distress? A problem hiding under the hood? Low prices earn more scrutiny, not less.
The discipline underneath all of it: the asking price exists to pull your number toward it. That's what an anchor does. So you never negotiate against the ask — you negotiate against your own number, the one you built from the earnings and the risk. Let the seller's number tell you about the seller. Keep yours tied to reality.
The ask is a conversation starter. Your number is the truth you bring to the table.
See you next week,
Eddie
The Small Business Digest — buy the right business, at the right price, with your eyes open.
(Educational content based on generalized experience — not financial, legal, or investment advice.)