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Fictional sample dealBeginner

Brightline Plumbing & Drain

Home services · Mid-size metro, Southeast US

Established residential plumbing and drain-cleaning company with nine trucks, eleven employees and a strong local reputation (4.8 stars across roughly 1,400 reviews). The owner is retiring after 22 years and is willing to stay on for a 90-day transition.

About 70% of revenue is service and repair calls; the rest is water-heater replacements and small remodel work for two local general contractors. A licensed master plumber who has been with the company for 12 years runs the field crews.

  • 11 employees, including a licensed master plumber (12 years with the company) who runs dispatch and the field
  • Owner works about 35 hours a week, mostly estimating and bookkeeping
  • Lease on a small shop and yard runs 7 more years, with a 5-year renewal option
  • Largest customer is a general contractor at 6% of revenue
  • Trucks average 5 years old; two were replaced last year
The numbers, as presented
From the broker’s package. Nothing here has been verified.
Asking price
$1,200,000
Revenue
$1,600,000
SDE (stated)
$420,000
Multiple
2.86x SDE
YearRevenueSDE (seller-reported)
Two years ago$1,420,000$365,000
Last year$1,510,000$395,000
Most recent year$1,600,000$420,000

Add-backs in the seller’s SDE

  • Owner salary and payroll taxes$105,000
  • Owner’s health insurance$14,000
  • Depreciation$38,000

Assumptions for this exercise

SBA 7(a) loan at 10.5% over 10 years, with 10% of total project cost (price plus working capital and closing costs) as your equity injection. Working capital $50,000, closing costs $45,000. A market salary to run the business is $90,000 a year, and ongoing equipment spending is $15,000 a year.

Your evaluation
Answer all five, then see how an experienced buyer called it.
1. Would you pursue this deal?
2. What price range would you offer?

If you’d pass at the asking price, give the range you’d consider if the seller re-priced. “1.1M” or “950k” work too.

3. What are the top risks? (pick up to 3)
4. What would you ask the broker first? (pick up to 3)
5. Estimate the DSCR

At the asking price, on the seller’s stated SDE, using the assumptions above: cash flow after the market salary and equipment spending, divided by a year of loan payments. The SBA floor is 1.25x.

x

Every sample deal is fictional: the businesses, names, places and numbers are invented for practice, and any resemblance to a real business is coincidental. The simulator is educational, not advice. It isn’t legal, tax, financial, investment or lending advice, and real deals deserve review by a qualified attorney, accountant and lender.

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