I'm looking at purchasing my family's business, which I've been managing for a while. I'm looking at possible deal structures and valuations and want to ensure that I am going down the right road.

The company is 35 years old and has always been profitable. It has consistently grown but not at a consistent rate. The average EBDITA over the last five years is $750K, with an after-tax cash flow of about $300K, including my salary (manager's) and the current owner's salary.

I expect it to continue to grow based on new products we have recently put out.

The offer I put forward is:

The total valuation is $4.5M, about a 6X EBITDA multiple.

Bank Financing: $4M Equity: $250K Seller Note: $250K

I'm also including a 10 years employment/consulting contract to the owner of $200K/year, having the owner still involved in the valuable company as he is the primary engineer.

This brings the total deal size to about $6.5M

When I run the numbers based on a 10% interest rate, the yearly debt service comes to just ~$800K.

From what I am seeing, this math doesn't work.

Am I off on my valuation? Is there a better deal structure that I am missing