Salary + equity for searchers-turned-operators of acquired businesses

searcher profile

February 12, 2023

by a searcher from University of Chicago in Chicago, IL, USA

What baseline salary is fair to pay oneself after acquiring a business and operating it? If it depends on the size, what pay bands based on size / revenue / other factor(s) is reasonable?

On the equity side, what have you seen for self-funded v. traditional?

Thank you

0
4
211
Replies
4
commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
From the lender perspective, I would say I think most clients back into what they are going to get paid based on a combination of what they need to live off of initially as well as what the cash flow will support. Depending on how much leverage is involved, often times the salary and owner can take is somewhat limited until the pay down debt, improve efficiencies, or grow the business. If there is a certain amount you need to make, I would start with that and use that in your analysis as you underwrite acquisitions.

As for equity, lenders have the same equity requirements for the most part regardless of self-funded or traditional. The difference in equity usually has more to do with lender type them type of search. If you are doing conventional financing most of our lenders do not want to lend more than 60 to 65% max of transaction cost. For SBA lending you can get away with as little at 10% down or possibly even as little as 5% if the seller carries back 5% or more on full standby. I usually recommend having the seller carry something back no matter what, even if not on standby, to provide additional protections to you as the buyer.

I am more than happy to discuss either topic at any time. You can ping me here or directly at redacted Thank you and good luck.
commentor profile
Reply by a searcher
in Washington, DC, USA
It depends. What are you wanting to accomplish?
commentor profile
+2 more replies.
Join the discussion