Seeking Insights: Buying Small Businesses (~$500K Revenue)
March 27, 2025
by a searcher from University of Leeds in Delray Beach, FL, USA
Hi everyone,
I’m exploring the idea of acquiring a small business (~$500K in revenue) and would love to hear from those who have experience with deals in this size range. Most advice I’ve come across leans against it, but I’d love to go beyond the usual "it's a bad idea" take and dig into real-world experiences—both the challenges and opportunities.
If you’ve pursued (or passed on) a deal like this, what were your key takeaways? What made it work (or not work) for you?
Looking forward to the discussion—appreciate any insights!
Rob
from University of Southampton in Los Angeles, CA, USA
- $500k revenue but what is EBITDA/SDE? I would imagine in the $100-200k range at best.
- How are you financing the acquisition? If you're using debt (SBA) then how much? If you're looking to max that out at 70-90% then your SDE is halved
- Then last question is are you planning to pay yourself a salary or not? If yes then is there even enough to pay yourself and then whats your plan for growth (assuming you do want to grow), how are you going to fund the growth?
The only way I've personally seen this strategy work is if:
- All equity purchase with seller note
- Very low entry multiple
- Existing owner wants to stay on, they're just tired of doing all the rubbish business stuff they don't want to do any more which you're coming in to take over (e.g. think creative professions)
- A cookie cutter business model that you can then repeat to acquire others very quickly (think quick service restaurants, tutoring services, music classes something like that)
from INSEAD in San Francisco, CA, USA
1. If the deal is nearby (doesn't require me to move or change my lifestyle) and doesn't require a lot of extra work. I know the traditional wisdom says all businesses are full-time, but once again there are always exceptions. For example, on a recent proprietary deal (that ended up falling apart) I was working with a guy that owned a pressure washing business that only had 2FTEs and the crew worked nights only on hospitals.
2. If the deal is clearly going to be part of a roll-up strategy. Another proprietary deal I am working on involves two pavement striping companies. Both of them are too small to buy individually, but I'm working with both the owners to see if it might make sense to buy one then the other one.