Buyers signing letters of intent on Denver small businesses this year are working from a comfortable-looking benchmark. BizBuySell's Denver marketplace summary puts the median asking price at $500,000 against median seller's discretionary earnings of $180,000, or roughly 2.8x earnings on asking, with median revenue near $890,000. That number sets expectations at LOI. It does not always survive to closing.
The gap opens because Colorado's employment and wage statutes moved in 2025, and the standard reps-and-warranties package many buyers relied on a year ago no longer covers what the state has since put on the buyer's side of the ledger. The friction is not in the market. It is in the file.
The Denver Baseline, Read Correctly
Denver's ~2.8x SDE asking multiple sits in the low end of the 2026 size band that CT Acquisitions frames as 2.5x to 3.5x for businesses generating $250K to $500K in SDE, with the range widening to 3x to 4.5x once SDE crosses $500K. The band is national. What compresses a Denver transaction within it is almost never the top-line story a seller tells. It is the underwriting adjustments a disciplined buyer makes after diligence surfaces liabilities the seller had no contractual reason to disclose.
Five of those adjustments now trace to specific Colorado statutes that changed effective dates in 2025 and 2026. A buyer who does not price them is paying the asking multiple for a smaller business than the schedule shows.
Five Colorado Items That Move Price After LOI
Owner personal wage liability under the amended CWA. HB 25-1001, effective August 6, 2025, expanded the definition of "employer" under the Colorado Wage Act so that individuals owning or controlling at least 25% of a business are personally liable for wage claims unless they can prove full delegation of day-to-day operational control. For a buyer, this changes what a "clean" wage schedule needs to look like. Any unpaid overtime, misclassified role, or off-cycle bonus dispute inside the lookback window becomes a personal claim risk that survives the transaction. Escrow needs to reflect that exposure, not just the entity-level exposure the seller's counsel drafted around.
Automatic fines for worker misclassification. The same 2025 amendment introduced automatic fines for misclassifying workers as non-employees where the misclassification affects wage-and-hour or reporting obligations, ranging from $5,000 for a first willful violation to $50,000 for repeat, unremedied violations. Denver has a heavy service-business mix, and BizBuySell's active Denver listings skew toward cleaning franchises, home services, med spas, boutique fitness, and staffing shops. Those categories have historically used 1099 labor aggressively. A buyer of a staffing company or a med spa with W-2/1099 blend now needs a defensible reclassification opinion in the file before closing, not after.
The 2026 FAMLI premium and the payroll model. Colorado's Family and Medical Leave Insurance premium moved from 0.9% to 0.88% of employee wages effective January 2026, with future rates set annually by the FAMLI Division director and capped at 1.2%. The 2 basis-point cut is not the story. The cap is. A buyer modeling a five-year hold on a payroll-heavy Denver service business should stress-test the P&L at 1.2% FAMLI rather than assume the current rate holds. On a $2M payroll, the delta between 0.88% and the statutory cap runs a shade over $6,000 a year, which at a 3x multiple is a $19,000 valuation swing hiding inside "no change to assumptions."
Non-competes voided for healthcare providers. SB 25-083, also effective August 6, 2025, voided non-compete and non-solicitation covenants for physicians, advanced practice registered nurses, certified midwives, and dentists. Denver's active listing set includes pediatric clinics, an established personal injury practice built around referral relationships, and multiple medical-aesthetics operations. Buyers of any provider-driven practice cannot rely on the non-compete language sitting in the target's employment agreements. Provider retention has to be re-underwritten with rollover equity, earn-outs, or transition bonuses. If the seller's asking price assumed the non-competes were enforceable, that assumption is worth a conversation before signing definitive documents.
The salary-threshold reality for everyone else. Under C.R.S. §8-2-113, as amended in 2022, employee non-competes are void unless the restricted party earns above an annually adjusted threshold ($123,750 in 2024), and non-solicits require a lower threshold ($49,500 in 2024). Violations may carry criminal penalties for employers on agreements signed after August 10, 2022. That means a buyer inheriting a workbook of legacy non-competes signed at hire is inheriting a stack of documents that are, for most rank-and-file employees, unenforceable in Colorado. Customer relationships travel with the employee absent a valid non-solicit. The revenue schedule needs to be tested for concentration in individual reps, not just individual accounts.
The Non-Compete Exception That Actually Matters At Closing
Colorado's non-compete statute preserves an exception for restrictive covenants entered in connection with the sale of a business. The exception is why brokered transactions still close with real seller restrictions attached, and why buyers reasonably expect a five-year non-compete on the seller as part of the purchase agreement.
What has changed is the interior of that exception. The 2025 amendments introduced statutory scrutiny where none existed before, and the older, broader carve-out is gone.
A seller non-compete tied to the sale of a business remains enforceable in Colorado, but the covenant needs to be drafted against the current statutory formula, not against the pre-2022 carve-out.
For a buyer, the practical consequence is that a stock template pulled from a 2021 deal will not protect goodwill the way counsel remembers it did. Scope, duration, and geography have to be tuned to the sale-of-business exception as it reads today. If the seller is also a licensed healthcare provider being retained post-close as a W-2 employee, the buyer needs to be clear which hat the covenant is being signed under. The sale-of-business exception attaches to the sale. The employment covenant, if the seller becomes a provider-employee, is void.
Where This Shows Up In The Purchase Agreement
The five items above translate into specific line items a Denver buyer should be pushing into the definitive documents rather than accepting a market-form draft:
- A specific representation on wage-and-hour compliance running to any 25%-or-greater owner, not just the entity.
- A worker-classification representation with a specific escrow tie-in sized against the $5,000-to-$50,000 fine ladder.
- A payroll-tax and FAMLI-remittance representation with a survival period long enough to cover the state's audit window.
- Provider retention structured as a purchase-price component (rollover, earn-out, or holdback) rather than as a covenant, for any healthcare-adjacent target.
- A separate seller non-compete drafted under the sale-of-business exception, isolated from any post-close employment agreement.
None of these are exotic. They are the items that a buyer working from a generic template will miss and a buyer working from a Colorado-current template will catch. The dollar difference between the two files, on a $500,000 median-priced Denver deal, is easily 10% of enterprise value once you include escrow, indemnity caps, and the retention costs the buyer has to fund out of post-close cash.
The Practical Read
The Denver market is not repricing at the top line. Median asking, median SDE, and the multiple that connects them look substantially the way they looked a year ago. What has moved is the composition of what a buyer inherits at closing, and that shift is invisible from the marketplace summary and the CIM.
Buyers who treat Colorado employment and wage law as a compliance footnote pay the asking multiple and absorb the statutory exposure. Buyers who read the 2025 amendments as diligence findings tighten the purchase agreement, size escrow to the specific liabilities, and often close at a lower effective price on the same nominal deal. The disciplined version of that work is what a business broker running a Denver process should be doing on the buyer's behalf before signing definitive documents, not after.
FAQ
Does a signed LOI lock in the purchase price on a Denver deal? Generally no. LOIs on small-business transactions are almost always non-binding as to price and are subject to confirmatory diligence. That is the window during which the Colorado-specific items above should surface and, where warranted, adjust price, escrow, or deal structure.
If the seller's non-competes with staff are unenforceable, does that always reduce value? Not always, but it reprices the risk. A business whose revenue rides on two or three key employees with unenforceable non-competes is a different asset than one whose revenue rides on transferable systems, contracts, and brand. The valuation adjustment is a function of how much of the goodwill walks with the people.
Can a buyer require the seller to sign a new non-compete at closing? Yes, and this is standard. The sale-of-business exception under C.R.S. §8-2-113 permits it. The document needs to be drafted against the current statute rather than pulled from an older template, and it should sit separately from any post-close employment or consulting agreement the seller signs.
If you are under LOI on a Denver business or preparing to sign one, the window to price these items into the deal is short and mostly one-directional. A confidential conversation with Meridian Business Advisors can put the right diligence questions in front of the seller before the purchase agreement is drafted around them.
