Anyone have experience with revenue drop?

October 13, 2025

by a searcher from City University of New York, Brooklyn College in New York, NY, USA

Reviewing a company that has a 50+ year history, 2022 and 2023 were consistent. In 2024, the revenue dropped to half (according to seller it was because of more union jobs). Gut reaction is to submit an offer at a lower multiple due to the lower revenue, what do you think?

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Reply by an intermediary
from Texas A&M University in Houston, TX, USA

Hi Monica, As a business broker in TX, I’ve had to find “meeting of the minds” when there's a revenue drops and the seller is convinced it's only temporary. My suggestion is to include a forgivable seller’s note in your purchase agreement that's contingent on revenue targets being met in future years. This way a portion of the purchase price can be forgiven if certain revenue targets aren’t met down the road. If revenue rebounds, the seller still gets the price they wanted. If things don’t pick back up and revenue stays down, you’re not overleveraged. The nice part is that a forgivable seller’s note (unlike an earnout) can be in a purchase agreement and still qualify for SBA financing. It also acts as a big motivator for the owner to assist you with turning over the business since they have skin in the game that's tied to future performance / revenue rebound. If you (or anyone else) are interested email me at redacted I'll share sample language from a purchase agreement that used this forgivable note structure and was financed with an SBA loan.

Reply by a searcher
from University of Pennsylvania in West Chester, PA, USA

More union involvement sounds like the new norm rather than a temporary setback. Basing the valuation on that year's EBITDA sounds reasonable to me.

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