Owner-operator

Definition

An owner who does the work of the business as well as owning it.

Why It Matters

Most businesses at this size sell to somebody who will run them, and the word matters most for what it commits a buyer to. An owner-operator inherits the seller's job along with their balance sheet: the hours, the customer relationships that live in one person's phone, and the tasks nobody ever wrote down. That is why diligence has to cover the transition period, the key-employee list and an honest account of the seller's week; none of the three is a courtesy question. It also sets the floor under the price, since earnings that include unpaid owner labor are earnings the buyer either performs or pays somebody else to perform.

In numbers: A $90,000 manager hired to do the work the seller did adds $315,000 to what the business is worth paying for at a 3.5x multiple.