I'm considering an acquisition of a 40+ year-old software business with a solid product and customer base, but very poor business management. No question, this deal presents significant challenges due to inconsistent financials, owner-operator management, a lack of recurring revenue, and outdated systems and processes.

Despite all of this, the core product is mission critical, would take millions to develop, and it has proven its value through numerous repeat customers. Under new ownership with experience in building software businesses, this could and should become predominantly a recurring revenue subscription business with significant growth potential over a 5+ year horizon.

I realize this deal would not qualify for 99% of searchers or search investors, but I am looking for advice from searchers and investors who may have experience evaluating and investing in similiar deals.


Key Points:

Financials: The business has generated an average revenue of $800k and SDE of $600k from###-###-#### Following the owners semi-retirement in 2019, the business has generated annual revenue of $300-400k and a high SDE margin while effectively on auto-pilot. Growth Potential: Under professional management, this business should achieve substantial revenue growth. While the product could benefit from a major update, there's immediate opportunity to grow by increasing marketing and sales efforts both within the current market (one US city) and in new regions. Challenges: The current owner has limited marketing experience, a fear of travel (he sells >90% of his software in one US city), and health issues that have sidelined him for months at a time. The company's outdated technology and limited distribution are also factors to consider.

Proposed Deal Structure: Proposed Deal Structure: To successfully acquire this business, I would need to secure outside equity investment of $200-$500k. I'm envisioning a deal structure that includes upfront cash and a substantial seller note, with an earn-out to motivate the seller and bridge the gap between his valuation expecations and mine.

Seeking Advice: Given the risk and potential of this business, I'm interested in hearing from other investors or searchers who have experience with similar opportunities. What are your thoughts on valuation, deal structure, and potential risk-reward given the known challenges? Please feel free to reach out privately if you have any interest in co-investing or discussing this opportunity further.