Red flag explained · Price and earnings
Asking multiple above the typical range: what has to justify the price
Short answer: The checker compares the asking multiple with the middle half of comparable listings in the same category. Above that range, the seller is asking you to pay for something the averages do not show, such as fast growth or proven retention. A higher price can be fair, but only with evidence you can check.
When the checker raises it
Raised as medium severity when the annual multiple (price divided by 12 months of profit) is above the 75th percentile of the checker's benchmark range for the listing's category.
Why it matters
Multiples bunch together because buyers compare listings. A listing well above the pack is either better in a way you can verify, or priced on hope.
The checker's ranges are asking multiples, not sale prices, and some categories have small samples. Treat the range as a prompt for a question, not a verdict. For a view built on other public data, see our October 2026 benchmarks: the middle half of listings priced $10k–150k asked 1.85 to 2.59 times annual profit.
A worked example
Composite example, not a real listing
Asking price: $140,000
Average monthly revenue: $3,000
Average monthly profit: $2,600
Revenue verified via Stripe
Churn: 3% monthly
260 paying customers
Top customer: 4% of revenue
Business age: 3 years
Owner hours: 4 hours per week
Traffic or revenue sources typed in: Organic search 30%, Direct 40%, Referral 30%.
What the red-flag checker returns: payback of 53.8 months on average monthly profit, and this flag:
Medium Asking multiple 4.49× is above the typical range
Ask: What justifies pricing above comparable listings: growth, verified retention, or something else you can document?
What to check
- Ask the seller what justifies the premium, and for documents that show it: monthly growth, cohort retention, contracts.
- Work out payback on the last 12 months, not on a recent peak or a run-rate.
- Ask whether the price is open to negotiation if the growth cannot be verified.
Questions to send the seller
- What justifies pricing above comparable listings: growth, verified retention, or something else you can document?
- What justifies the price compared with similar listings: growth, retention, or something else you can document?
- Is the price firm for the business as listed, and does it change if inventory, domains or other assets are left out?
- Has the business been listed before or had offers that did not close? What happened?
Related flags
- Priced below one year of profit
- ARR far above trailing revenue
- Short averaging window
- All red flags explained
Useful next
- Listing benchmarks, October 2026
- True payback calculator
- Free red-flag checker: paste a listing and see which flags it raises.
Get the seller question checklists
Join the FirstPass Memo waitlist and the next page gives you the general seller question checklist (web page and PDF) straight away, along with the other free files: seller question checklists for eleven business types, the 72-hour vetting plan and a deal-tracker spreadsheet. Nothing is emailed; you download them on the page.
We will write when paid memos open, and occasionally before. Unsubscribe any time by replying "stop" to hello@firstpassmemo.com. Looking at a live listing priced $10k–150k? Apply for a free beta memo instead; its confirmation page has the same downloads.
The checker is a set of plain rules, not an AI model, and its flags are prompts for questions, not verdicts. Composite examples are invented. Informational screening only, not investment, legal or tax advice.