Buying business with short track record?

May 02, 2024

by a searcher from Boston College in Denver, CO, USA

I came across a business that was started in###-###-#### It performed very strong in 2023 ($1.8m of EBITDA) and on track for similar performance in###-###-#### This business model has reoccurring revenue supported by customer contracts in a strong market with a lot of demand. Has anyone bought a business with a similar short track record of performance? Assuming it won't be eligible for SBA loan with only a year of performance but looking for advice on financing.

Thanks!

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Reply by a searcher
from University of Utah in Irvine, CA, USA

Thanks for the tag, ^redacted‌.

I would not discount SBA in terms of financing. There are always a hand-full of aggressive lenders out there that may do that deal, especially if you don't have to max out the full $5MM SBA limit. Find a good broker who's getting deals done and see what you can do. You don't know until you try.

Personally, I get nervous about a business that's only a couple years old as I like longer-term, consistent revenue, but if you get it for a low multiple (and I suggest you negotiate a low multiple given the short track record and possibly difficulty in financing), it might be a great opportunity.

Reply by a professional
from Northwestern University in Southborough, MA, USA

The buyer's experience is pretty important here. If you have experience with business you know what to look for - how sticky is the revenue, why is it ramping so quickly, is it a fad or a trend, is the seller experienced herself or is it a founder who is inexperienced himself and he can't handle the scale? If you've experienced scale, you've experienced pain, and if you know you need to hire the right people to manage that pain - if you can't do that, selling might be the best option. I'd recommend talking to someone who can do a really strong quality of earnings analysis and zooming out on the macro trend on where the business is operating and then make your decision.

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