Savvy Salary for lower SDE Business

searcher profile

July 09, 2024

by a searcher from Texas A&M University in Irving, TX, USA


Needing to make about 80k stretch as far as it can, for my family of 5, from a smaller SDE business I am about to buy.

Key question: would it be better to treat this business as a 'project' for a separate management company (mine to set up to invoice management services for the operator role to the target business) to expense that 80k further (milage expenses, meals, other expenses an owner may not be privy to?) instead of just a standard 75k salary with another 8k of taxes surrounding that?

Context:

- Hope would be to grow enough to hire a local GM & not have me full time on site - ethically does seem like a project from a holding co vs standard W2 operator of a business'

- I am estimating about 2 years of this 80k - profits should increase

- Business would be about 100 miles round trip - as w2 it would be "commuter miles" & not deductible? so this alone could be roughly 12k of tax-free expense over the year

- I am leaving corporate with nice benefits and higher salary - so I want to be as savvy as possible with this smaller amount coming from the business as I set sail

- I tend to overthink or try to overly squeeze savings in my life - please feel free to tell me to stop worrying about this and just grow the business haha

Thank you all in advance!

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commentor profile
Reply by a searcher
from Texas A&M University in Irving, TX, USA
Happy to air it out a little more here for more to jump in + DM for fun, family connections. Yes its about 160k SDE - Have a partner on this deal who owns two shops in the same industry with smaller teams, more rural areas, and higher revenue/SDE. The partner is in large part also a safety net to ensure I follow his playbook. He is planning to cross train me at one of his locations. We also have a good cushion of savings after the purchase to provide lifestyle buffer.
commentor profile
Reply by a searcher
from University of Denver in Boston, MA, USA
Brittain - a good rule of thumb is that your SDE will be 50% of the sellers SDE after debt service, integration, etc. So I hope its 160k SDE, not 80k SDE historically. How are you so confident you'll grow it quickly? What industry is it?

I bought a smallish business right after having our 3rd kid and my wife having non paid maternity leave. So I know the gamble you're taking but it doesn't always work. Happy to chat on a call if you DM me.
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