When keeping it real goes right?

November 04, 2025

by a searcher from The University of Chicago - Booth School of Business in Carmel, IN, USA

Seller was looking for $450K on a $220K SDE business...can maybe make that work. Forward to 2025 and SDE is about $50K TTM being generous with addbacks. I understand the reasons for the downfall and believe there is real upside with right operator. I put LOI in front of seller who was deeply offended despite my already sky high valuation. Im about to fire off an email explaining DSCR, how this is essentially unfinancable (lenders actually might notice the 80%ish decline in SDE), and they are living in alternate universe where 9x on $50K SDE is real. Im almost positve im just wasting my time but has anyone ever had success explaining how lenders fiance and how businesses get valued? Going to be more tactful (I hope) in email but does this ever work?

Reply by an intermediary
from Arizona State University in Long Beach, CA, USA

This is simply not a fit for a purely financial Buyer. A strategic Buyer in his industry can justify paying more based on the revenue they'll acquire, and potential synergies. If you really like the business, you can try offering a higher EV but with Seller financing and a portion that may be an earnout tied to future improvements in performance. That approach will keep the bank out of it, and potentially satisfy the Seller if he believes you can drive improvements there.

Reply by an intermediary
in Campbell, CA, USA

This is a good example of when an intermediary could be very helpful. Giving a business owner a lecture is a very low probability approach. You say you understand the reasons for the downfall and presumably you think you can fix them. If you don't decide to walk away as others have suggested, try a deal structure that shares the risk and creates a win-win for you and the seller like a seller note and an earnout or a clawback or both.

+11 more replies.

Join the discussion