How Searchers Can Slash Over $100K Off Their Purchase Price:

professional profile

April 02, 2024

by a professional from James Madison University in Washington, DC, USA

redacted

2. Financial Health as Leverage: Insist on compliance with specific debt service coverage ratios###-###-#### to 1.5), a common requirement for SBA-backed loans for transactions under $5 million. Demonstrating the business’s ability to meet these standards not only underscores its financial viability but also positions you to effectively negotiate a lower purchase price.
3. Leverage EBITDA Multiples for Dynamic Pricing: Initiate your pricing negotiation by anchoring the purchase price within a spectrum of EBITDA multiples (3.5X to 4.5X), rather than defaulting to a static figure post-due diligence. This strategic approach allows for a price that more accurately mirrors the business’s true worth, creating opportunities for significant financial advantage.

Looking to buy or sell an business? Let’s chat.

redacted
redacted
https://share.hsforms.com/1b5vnARRnR8mTD6pSKPPWpgqc19n


See full post here
https://www.linkedin.com/posts/patrick-o-connell-3b235177_smart-acquisition-strategies-how-smb-buyers-activity-7180926972414316544-6Nie?utm_source=share&utm_medium=member_desktop

0
2
198
Replies
2
commentor profile
Reply by a professional
from James Madison University in Washington, DC, USA
The percentage depends on the total purchase price. Typically, requiring the seller to carry a 10-20% note is considered best practice. For deals under $5,000,000 in enterprise value (EV), buyers should ideally be able to put down 10-15% and finance the remainder. If buyers cannot meet these terms, it often indicates that the seller is asking for a price higher than what the market is willing to pay. While injecting more capital is an option, it's crucial to assess whether the business can support a higher asking price and why such an increase is warranted.
commentor profile
Reply by a searcher
from Humber College in Toronto, ON, Canada
^redacted‌ thank you for this post. Regarding #2, what percentage of the purchase price would you push to be compliant with the debt service ratio? Said another way, wouldn't a reasonable counter argument from the seller be that if only 60% is financeable within the coverage ratio, that's fine, the deal is appropriate for those who can inject more capital?‌
Join the discussion