500k-750k SDE: Self Funded Search "No Mans Land"?

searcher profile

September 29, 2024

by a searcher from Michigan State University in Kalamazoo, MI, USA

I am a self-funded searcher, and I keep coming across solid businesses in the $500k-$750k SDE range.

The "official line" from the well-known self-funded search investors is they are looking for deals with 750k+ in SDE (preferably $1m+).

On the other hand, I assume there are relatively few searchers with $500k personal deployable cash (750k SDE at 4x EV multiple = $3m, $300k (10%) down + 150k (5%) post-close liquidity + $50k closing costs.)

How are these deals getting done? Are the established investors coming down? Is it primarily friends and family coming in at this level? or are searchers just bringing their own cash?

If you or someone you know has bought a business in this range I would love to hear your story.

Thank you!

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commentor profile
Reply by a searcher
from University of Virginia in Richmond, VA, USA
1) you don’t pay 4x SDE. You maybe pay 4x EBITDA but not SDE. A multiple for a job is a scam.
2) you don’t buy the business without the working capital. That’s a scam.

what you described above is a double scam.
commentor profile
Reply by a searcher
from University of Notre Dame in Chicago, IL, USA
Good question Derek. As self funded searcher myself I asked this same question easy in my search. From the self funded deals that size that I’m aware of, it’s usually a combination of exactly what you said: investors coming in post LOI, family/friends money, plus buyer’s cash.

The one other finding source I hear about frequently (although not too dissimilar than buyer’s cash) is using a ROBS to fully or partially fund the equity injection. That’s at least how I plan to fund my eventual deal, pulling each of those levers to whatever degree I can. Curious to hear if other have additional suggestions.
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