Potential Acquisition - Help & Advice

September 07, 2025

by a searcher from University of Central Florida in North Palm Beach, FL, USA

I had an exciting meet and greet last week and am contemplating moving towards LOI, but would like some advice or feedback as I am still on the fence. Business: project based with healthy reputation and backlog into next year. Good bit of overhead (lease, healthy operational org chart, and materials). I love & hate the overhead as the seller has developed a great team to where his day to day is focused on oversight and not working in the business. I also have a considerable amount of transferable work experience in this space. QoE has been done and verified the following numbers over past three years: 2022: $4m Total Revenue / $3.5M Total Cost of Sales / $600K Gross Profit / $100k SDE 2023: $5.2M Total Revenue / $3.5M Total Cost of Sales / $1.6M Gross Profit / $830k SDE 2024: $5.2M Total Revenue / $3.5M Total Cost of Sales / $1.6M Gross Profit / $1M SDE In a nutshell, to me at least, if the business only produces $4M in Total Revenue, then the business nearly breaks even. When it exceeds $4M in Total Revenue, then the upside really starts to materialize. That benchmark, I just cannot get out of my head and jump to LOI. Bolting on a SBA loan, that benchmark only grows, and since this is project based - the level of revenue uncertainty is larger than the reoccurring revenue service based business. What I could use some help on: 1) more questions I should be asking? 2) creative deal structuring to ease the risk on that benchmark with a loan Any and all insight is appreciated. I have been solo searching full time for 8 months now and this honestly is the best deal I have had the opportunity to consider, just don't want to jump to LOI for the wrong reasons or without some outside feedback.

Reply by an investor
in Marco Island, FL 34145, USA

As with all project-based businesses ask for the following: 1. Pipeline of outstanding proposals 2. Pipeline of awarded business 3. Pipeline of WIP (Work in Progress) 4. Who sells the work? 5. Concentration of customer base 6. What is going to cause the person doing the selling to quit after they find out the business has been sold? 7. Accounts receivables aging 8. Accounts payables 9. Working capital requirements

Reply by a searcher
from Harvard University in Omaha, NE, USA

It's difficult to give any help with such scant information, but here's what comes to mind for me: - 2023 and 2024 are flat for both revenue and gross profit, but SDE is 20% higher. Yellow flag. I want to know why. Is this seller deferring expenses to make SDE look higher than you'll end up paying afterwards as an ongoing going concern? If so, this business isn't $1M in SDE. - Project-based businesses should command a lower multiple. I wouldn't put too much debt on it either. - Is the business cyclical or secular? - What's the nature of the customers? Are they one-time? Do they reoccur? How often do they reoccur? You need to get a firm assessment on the quality of the revenue. - Any customer concentration? - How solid is the backlog? Is it contractually set? How easy is it for a client to get out of the contract or walk away? How long (in months) will it take to execute the backlog with the current capacity? - Who's doing the sales? The owner? Someone else? - Remember that owners will always characterize their involvement as light or strictly "on" the business. And it may be to that owner who's owned it for decades, but it won't be for you. - What's the competitive landscape? Regional? What's the pricing in the market, and how does this company compare? Who has the pricing power--you or the customer? - The Cost of Sales looks fixed. How is it now scaling or decreasing with revenue? That doesn't make sense. As I mentioned above, you need to get a firm handle on the quality of the revenue so that you can assess its strength going forward. You need to get a firm handle on the backlog. How customers are gained and return. What is true SDE? As far as deal structure goes, for as little as is published, I'm here: - lower multiple - earnout tied to the backlog being realized - low leverage, but you gotta model out the sensitivities around that based on your revenue quality, backlog, and SDE assessments. Highly recommend you read the book called Boss Life. It's written by an entrepreneur who owned a purely project-based business that made custom furniture. It was challenging, to put it mildly.

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