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Fictional sample dealIntermediate

Greenway Landscape Co.

Landscaping and grounds maintenance · Suburban market, Mid-Atlantic US

Full-service landscaping company serving HOAs, office parks and high-end residential clients. The broker’s recast shows $500K of SDE on $2.3M of revenue, and the asking price is a round 3.0x.

The owner says the business “really makes more than the tax returns show” and the recast adds back several “one-time” and “discretionary” expenses. His wife runs the office and will leave with him at closing.

  • 24 employees in season, 9 year-round
  • Owner’s spouse runs the office (scheduling, billing, payroll) and plans to leave at closing
  • Two lawsuit settlements in the last three years (property damage claims)
  • About 55% of revenue is annual maintenance contracts
  • Equipment is in fair condition; the newest mower fleet is 4 years old
The numbers, as presented
From the broker’s package. Nothing here has been verified.
Asking price
$1,500,000
Revenue
$2,300,000
SDE (stated)
$500,000
Multiple
3.00x SDE
YearRevenueSDE (seller-reported)
Two years ago$2,150,000$455,000
Last year$2,240,000$470,000
Most recent year$2,300,000$500,000

Add-backs in the seller’s SDE

  • Owner salary and payroll taxes$115,000
  • Spouse’s salary (“not a necessary role”)$60,000
  • “One-time” legal settlement$45,000
  • Owner’s truck, phones and travel$22,000

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 $80,000, closing costs $50,000. A market salary to run the business is $95,000 a year, and ongoing equipment spending is $25,000 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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