LenderHawk analysis. Not affiliated with or endorsed by The Permanent Podcast.
Brent Beshore and Emily describe how sellers should think like buyers when pricing and negotiating a business sale. They argue that buyers care less about rosy projections than about proof of earnings quality, downside protection, and a credible path to their required return, often 20% to 35% IRR for smaller PE, search, and individual buyers. The episode also explains why earnouts and full-cycle earnings can bridge valuation gaps when the business is cyclical or volatile.
Business owners preparing to sell, and ETA buyers underwrite risk-adjusted returns and valuation discipline.
Buyers anchor on their required return, so a seller’s asking price has to support the buyer’s economics, not just the seller’s desired number.
For smaller PE funds, search funds, fundless sponsors, and wealthy individuals, the episode cites a roughly 20% to 35% IRR expectation depending on strategy and opportunity cost.
Projection-heavy marketing is weak when future growth has not already been proven; proof of health in the historical record carries more weight.
Earnings quality matters as much as earnings quantity, because a business with volatile results is valued differently from one with steady recurring performance.
Showing the business as a full-cycle asset is more credible than using peak-year earnings when the company is cyclical.
Earnouts can bridge valuation gaps when the buyer and seller disagree on how much of the future is already earned versus still risky.
Third-party verification of market position, pricing power, margins, and relative scale strengthens the seller’s case more than self-reported claims.
Smaller private equity funds, search funds, fundless sponsors, and wealthy individuals often expect roughly 20% to 35% returns.
Brent and Emily use this range as a buyer-side hurdle rate for many ETA-style acquisitions.
A business making $5 million a year can have very different quality of earnings depending on whether it is recurring and steady or highly variable.
They contrast stable recurring revenue with a company that climbs from $1 million to $2 million to $5 million over three years.
Show proof of health in the historical numbers instead of leading with aggressive growth projections.
Why: Buyers discount unproven future growth and reward evidence that the company already performs reliably.
Acknowledge cyclical risk directly and explain the worst historical swings the business has survived.
Why: Transparency about downside makes the buyer more comfortable than trying to hide volatility.
Use earnouts to bridge valuation gaps when the seller and buyer disagree on the durability of future earnings.
Why: Earnouts tie part of the price to actual future performance and reduce risk for the buyer.
Support claims about competitive position with third-party verification whenever possible.
Why: Independent evidence carries more weight than seller assertions during diligence and negotiation.
Frame the company as a full-cycle business rather than a peak-earnings story if results are volatile.
Why: Buyers will underwrite the business across conditions, not just at the top of the cycle.
The hosts use this pattern as an example of a business that looks impressive on the surface but may have mountain-range volatility rather than steady earnings. They contrast it with a recurring-revenue company that grows 5% to 6% per year and is easier to underwrite.
Lesson: Rapid top-line or earnings growth is less valuable than stable, repeatable performance when a buyer is pricing risk.