I've noticed the gurus tell people to say 3-4x EBITDA which translates to a $ amount say a business is doing $500k EBITDA and a 3x is 1.5M.
So you offer the business owner 1.5M and then he feels that's too low and says I want 2M then your like we can't do 2M how about 1.6M then he says 1.8M and you are Nickel and diming each other until someone gets mad.
This is the worst way, you can't negotiate a business like a pawn shop would negotiate.
Instead I approach it by terms, figuring out what the owner is interested in.
Is he looking to retire, is he distressed, looking to expand.
And then we agree on terms and percentages without mentioning a price, say 30% down, 60% seller finance and 10% equity hold, this is tailored to his situation explains to him how he can save on taxes....
Once I have terms I can send an LOI with the price included and it's going to have a way higher chance of going through.
The terms set the price, I've found this to be a more efficient way of negotiating as the discussion is more about structure and the future instead of a quick cash out.