How should multiples be adjusted for relationship based businesses?

by a searcher from Binghamton University, State University of New York - School of Management

1 year ago

When purchasing a business that derives much of its success from the personal relationships that the owner has built, how should that factor into the multiple? I am looking to convince a seller to lower their price given that most of what I would be buying is their relationships.

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searcher from Harvard University - Harvard Business School

I talked with a searcher recently who bought a business that ended up being a heavy relationship-based business (couldn't tell until after buying). Not only did business fall substantially when the owner left but the owner also had misstated and misrepresented other aspects of the income and cash flow forecasts. Even without the misstatements it was a disaster for the searcher - the other small-PE equity providers took over the business and the CEO/searcher had to leave to save his career.

2 months ago | like reply | 0 likes

searcher from Middlebury College

Jeff - Might have some insight here. Ill message you to see if our industries overlap

1 year ago | like reply | 0 likes

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