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Northfield Signs & Graphics

Sign manufacturing and printing · Regional hub city, Northeast US

Custom signage, vehicle wrap and large-format printing shop with a long list of local commercial customers. The listing prices the business at about 2.9x SDE of $380K, “based on normalized earnings.”

Reading the three-year history closely, $380K was the SDE from two years ago. Revenue has declined each year since, and the trailing twelve months are lower still. The owner attributes the decline to “a slow economy” and the loss of a regional franchise client.

  • The $380K SDE in the listing is from two years ago
  • Revenue down about 10% a year for two years
  • Lost a regional franchise client (about 12% of revenue) last year
  • Two online print competitors now advertise heavily in the area
  • Large-format printers are 8 and 10 years old
The numbers, as presented
From the broker’s package. Nothing here has been verified.
Asking price
$1,100,000
Revenue
$1,620,000
SDE (stated)
$380,000
Multiple
2.89x SDE
YearRevenueSDE (seller-reported)
Two years ago$2,000,000$380,000
Last year$1,800,000$335,000
Most recent year$1,620,000$300,000

Add-backs in the seller’s SDE

  • Owner salary and payroll taxes$100,000
  • “Normalization” to the best year$80,000

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 $60,000, closing costs $45,000. A market salary to run the business is $85,000 a year, and ongoing equipment spending is $20,000 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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