Bridging a valuation gap in a proprietary deal?

I’m working through a proprietary opportunity in the construction supply space — a single-location business with a solid local reputation, consistent growth, and strong margins. The owner is motivated but has been advised by his CPA that his business should trade at a 6–7x SDE multiple, excluding his real estate, which he values separately. At face value, it’s a great business: clean financials, sticky contractor relationships, and room for professionalization. But at that valuation, the deal struggles to pencil out — debt service coverage gets tight even with conservative leverage, and there’s not much cushion for reinvestment or transition risk. From my perspective, a 3–4x multiple on the operating business (excluding RE) feels more in line with market comps for a single-location, owner-reliant distributor with low capex but high personal dependence. Here’s my rationale: • Owner Dependence: He’s run this as a one-man show for years. The systems, customer relationships, and quoting all run through him. The first step post-close is replacing institutional knowledge, not scaling it. • Limited Scale & Concentration: While margins are healthy, construction cyclicality make it impossible to justify a 6-7 multiple. • DSCR Sensitivity: Even with the real estate value carved out, paying above 4x SDE drives DSCR below 1.25x at realistic interest rates and working capital needs. • Market Norms: From what I can find similar regional distributors and supply houses tend to trade in the 3–4x range, occasionally 4.5x for scale or multi-location models with depth of team. I’m still very interested in the deal — the fundamentals are good, and the seller seems genuinely open — but I’m trying to strike the right balance between respecting the seller’s life’s work and ensuring the business can sustain the debt load that kind of valuation would require. Has anyone else navigated a valuation gap like this in a strong but owner-heavy business with attached real estate? How did you frame it — creative structure, earnout, or staged buyout?