Downsides of "buying a job" below 750k+ EBITDA?

August 23, 2024

by a searcher from Yale University - School of Management in Los Angeles, CA, USA

I have read and seen many deals that float higher than 750k+ EBITDA range and would love to understand more on the risks of buying anything smaller than that.

This is assuming multiple floats around 3x EBITDA. I get it is more of a "job" once you buy a company in the lower range but if lets say I am buying a 500k ebitda business at 1.5m, and when I pay loans per year, let's estimate 200k, its still net profiting around 180k after taxes. Obviously math is not that simple but I would love to know your thoughts.

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Reply by a professional
from University of Virginia in Charlottesville, VA, USA

1. Your first business does not have to be your last
2. Getting in the game is valuable

Just food for thought

Reply by a searcher
from Brigham Young University in Chehalis, WA 98532, USA

Remember, that 1M+ EBITDA Business was once a 250k SDE business. The founder may have been a technician, and they almost certainly didn't have an MBA from a top ranked school, work as a management consultant nor have PE investors with robust strategic know how; they just got it done. While sub 1M EBITDA business likely are not ready to scale there is often still lots of opportunity for improvement and growth, the owner is typically too far in the weeds on things and hasn't had the time to think about things strategically. Lots of tasks are often overly manual, digitization has possibly never happened, etc. A fresh look from new management with a solid improve then grow plan can create some solid returns; you just have to be ok with spending a decent amount of time initially working in the business instead of just on it.

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