How much to offer for a business is usually approached from the seller's side, as a discount off the asking price. The buyer's side is more useful: the business has certain earnings, the buyer needs certain pay, what is left can service a certain amount of debt, and that amount of debt plus the buyer's cash is the most the buyer can offer without buying a job. This page works backwards through that chain with the free calculator on this site, and stops short of saying what the business is worth, which is a valuation and not this site's job.
Start from what is left after your pay
On the calculator's worked example seller's discretionary earnings of $180,000 less the buyer's own pay of $90,000 leaves $90,000 a year. That is the whole budget for debt service, and a lender will want it to cover the payments with a margin. At the example's 131% coverage the payments are $68,731.68; insist on your own margin and the payment budget follows.
Turn the payment budget into a price
With a lender at 10.5% over 10 years and a seller note at 6% over 5, each $1,000 of price funded 80% by the bank and 10% by the seller costs about $12.73 a month. A payment budget of $68,731.68 a year is $5,727.64 a month, which supports a price of $450,000 on that stack. A thinner stack, a higher rate or a shorter seller note supports less.
Add your cash, and that is the offer
The price the payments support plus the buyer's cash on the price is the most the buyer should offer, and the offer should be less than that so the year has room. Working capital of $40,000 and closing costs of $25,000 come from the buyer's cash as well and do not raise the offer. The register in Pro keeps each offer beside the stack that justified it.
Questions people ask about how much to offer for a business
Should I offer below the asking price?
Offer what the earnings support after your pay, whatever the asking price is. If that is above the ask, pay the ask; if it is below, the difference is the negotiation.
How does the seller note change the offer?
A larger seller note lowers the cash you need but raises the payments, which lowers the price the same earnings support. The sheet shows both movements at once.
Is this a valuation?
No. It is what you can afford to pay and still be paid. What the business is worth to anyone else is a different question.