Applying Multiples with FF&E

September 18, 2025

by a searcher from United States Military Academy in St. Petersburg, FL, USA

I'm running into two different scenarios when it comes to asking price/valuations and FF&E. I'm seeing sellers or brokers applying a lower multiple, then layering a high value FF&E on top of that to justify the asking price. My understanding was the total value of the offered FF&E was included in the application of the multiple - not layered on top after the fact. For context, these are smaller businesses with SDE just under $1M. e.g. I am calculating a ~4-5x for a home service company based on their math, and they are positioning it as ~3.5x with $700k of FF&E. Any advice on the best way to go about this (or how lenders or a deal team would approach it)?

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Reply by a lender
from California State University, Sacramento in Seattle, WA, USA

And from an SBA lending perseptive, the entire purchase needs to be able to debt service. So regardless of the smoke and mirrors on price+equipment, your lender is going to look at the company’s ability to afford the requested debt on entire price. This is also the same for inventory…you need to be able to afford the debt for buying the fully functioning company. redacted

Reply by a searcher
in Traverse City, MI, USA

I’ve run into the same thing on a handful of deals I’ve cold-called into — sellers (and sometimes brokers) will back into their “asking multiple” by stripping out FF&E, then layering it back on top as if it’s incremental value. The way I try to explain it is: without the FF&E, the earnings aren’t real — the business doesn’t exist. You can’t run a service company with no trucks, tools, or equipment, so those assets are part of the engine generating SDE. From my experience, there are really two buckets: • Normal operating FF&E: the equipment necessary to deliver the revenue. This should already be captured in the earnings multiple. It’s “table stakes” and doesn’t get added on top. • Excess/optional assets: if there’s real estate, surplus equipment, or things not required to generate current cash flow, that can be added to enterprise value as a separate line. On the lending side, most SBA or conventional underwriters look at it this way too — they’ll underwrite the deal based on cash flow, and the appraiser may assign collateral value to FF&E, but that doesn’t mean you pay 4–5x cash flow plus replacement cost of the trucks and machines. The equipment is collateral, not an add-on to enterprise value. Where I’ve had traction is: 1. Recasting the math back to a normalized multiple (e.g. “At your price, this is really 4.5x SDE inclusive of FF&E, not 3.5x”). 2. Separating required vs. excess FF&E — and being willing to pay a premium only for true surplus assets that aren’t embedded in the P&L. But then the question arises…if they’re not embedded why are they part of the business, or do I even need them. 3. Using lenders/appraisers as the backstop — if the seller hears directly from a financing partner that the bank will underwrite the deal on cash flow inclusive of FF&E, it helps ground expectations. Curious how others here have navigated this conversation. Have you seen success in reframing, or do you find it better to just walk from sellers who won’t budge?

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