SDE Breakdown

by a searcher from The University of Michigan - Stephen M. Ross School of Business

1 year ago

I am curious about rough numbers for SDE breakdown/usage. Let's use $1M as an example. Assuming 50% is debt service, what percentage of the remaining $500k should be 
-  planned for taxes?
- kept in business as cash/working capital?
- other items?
- given as owner/operator salary?

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2 comments

searcher from Western Illinois University

Clint Fiore on Twitter said something to the effect of... rule of thumb for how much to pay yourself should be no more than the amount of equity you personally put in on the purchase.

1 year ago | like reply | 0 likes

lender from Eastern Illinois University

Unfortunately there is not a clear answer to this question. There are way to many variables to calculate this generically such as what type of entity is the operating company, how is the purchase structured and what type of depreciation and amortization will exist post closing, what type of future CAPEX needs does the business have, how much of a salary to owners need to live on, etc. We are always happy to look at a specific opportunity and provide feedback on what type of debt is supported based on that specific opportunity. You can reach me at --@----.com

As for working capital, the amount of working capital really should be figured as part of the closing. You should retain existing working capital in the business and/or have sufficient working capital built into your credit facility to support operations at closing. You should not need to plan on future earnings supporting working capital, unless you plan to use it to fund specific growth.

1 year ago | like reply | 0 likes

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