Need help on valuation

by a searcher from The University of Chicago - Booth School of Business

1 year ago

I'm a self-funded searcher about to submit an LOI, and I'm seeking advice on the valuation. Some of the business attributes:
- ~$2.5M EBITDA
- Home services business
- Strong management team in place staying with the business post-deal
- High recurring revenue (70%+) with very low churn
- Diversified revenue streams
- Long, profitable track record (20+ years in business)
- Ample growth/expansion opportunities

It's going to be a competitive process. I want the deal but obviously don't want to overpay. My worry is that this will command a purchase price significantly higher than like a 4x EBITDA. For a business like this, is it feasible to push the valuation to 5x EBITDA or higher for a self-funded searcher? Any thoughts on capital structure (SBA + conventional loan + investor equity)?

Thanks!

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10 comments

professional from Golden Gate University

If you are looking for a valuation done right on such company it might take about###-###-#### hours of work to create valuation model. Considering the fact that the company will be able to provided needed documents and reasonable projections. It is especially hard for small businesses as they do not take into account business practice's of FP&A and Accounting. Having said that it will cost you between 13k-25k for decent work on valuation.

1 year ago | like reply | 0 likes

searcher from Clemson University

Will be hard for you to compete in a competitive process with PE / strategics. Depending on the home services end-market, it'll almost certainly trade for more than 5x.

1 year ago | like reply | 0 likes

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