A business listing tells you what the seller made. It doesn't tell you what you will make after you've signed a loan, paid yourself, and covered every payment the deal requires. Four numbers answer that — and together they turn "this business cash-flows" into "here's exactly what this deal pays me."
New owner salary: pay yourself first, on paper
Before anything else, decide the living wage you'll draw from the business — the salary that covers your mortgage, groceries, and life while you run it. This isn't optional bookkeeping: lenders subtract a market salary for you before running any coverage test, because money you need to live on can't also service the loan. A business showing $200K of seller's discretionary earnings might have only $120K available for debt once an $80K owner salary comes out. Set this number realistically; setting it artificially low doesn't fool underwriting, it just fools you.
Take-home: can it pay you and pay the loan?
Take-home = your salary + the profit remaining after the business pays its loans. It's the single most practical question in business buying — can this business pay me and pay the loan at the same time? — collapsed into one figure. If earnings cover the debt service but leave nothing beyond your salary, you've bought a job with a lien on it. If take-home comfortably exceeds what you earn today, the deal is doing what a deal should.
Business cash-on-cash: the return on your invested dollars
Take-home measures your paycheck; cash-on-cash measures your investment. The formula:
Cash-on-cash = annual free cash flow after debt service and a market salary ÷ total cash invested
The numerator deliberately excludes your salary — that's compensation for work, not return on capital. The denominator is all the cash the deal consumed: down payment, closing costs, working capital, reserves. If you put $250K into a deal that generates $50K of free cash flow after the loan and your salary, that's a 20% cash-on-cash return — a number you can compare directly against any other use of the same $250K, from a different acquisition to an index fund.
Payback years: how fast your cash comes back
Payback years = total cash invested ÷ annual free cash flow. It's the same fraction flipped into time: how many years of free cash flow it takes to recover the cash you put in. The 20% cash-on-cash deal above pays back in five years. Shorter is better, not just emotionally — cash you've recovered is cash available for the next opportunity, and a long payback leaves you exposed to more years of things going wrong before you're whole.
Run all four before the offer
These numbers interlock: a higher owner salary lowers take-home's profit component and stretches payback; a bigger down payment improves take-home (less debt service) but dilutes cash-on-cash. The right structure balances them for your situation — which is exactly why they should be modeled together, not guessed separately.
The free Deal Analyzer computes all four from a deal's financials and structure: it subtracts your salary the way a lender will, shows take-home after debt service, and grades the cash-on-cash return and payback period against what buyers typically target. Everything it shows is an estimate from the numbers you enter — the point is to see what the deal pays you before you commit to it.
All figures are estimates for informational purposes only — not financial advice. Consult a qualified professional before making financial decisions.