SEARCH SWEET SPOTS?
What's your sweet spot for purchase price? And for your & investor equity vs debt %'s?
Considering 2 deal levels, using these assumptions:
- c.$3m acquisition funded by a $1m personal investment and $2m SBA loan (estimated 4x multiple, 100% equity)
- c.$10m deal backed by the $3m and search funds (estimated 6x multiple, 30% personal/loan equity with a 15% step-up)
Running basic numbers based on hopefully conservative 10% growth rates: Deal #1 and# 2 come out even after 5 years. Deal #2 comes out ahead of deal #1 after 10 yrs by 25%
Assumptions can vary but still....not as big a gap as I expected from the very different deals.
Interesting for folks to share thoughts on their preferred deal values & personal/investor/debt %'s.
Helpful if you identify if you're commenting from an investor or a searcher perspective, or both.
Thanks for any input.