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Fictional sample dealBeginner

Tri-County Heating & Air

HVAC services · Three-county region, Central US

Residential HVAC service and replacement company with about 1,800 members on annual maintenance plans, which keep technicians busy in shoulder seasons and feed a steady stream of replacement jobs.

The owner holds the state mechanical contractor license the company operates under. His operations manager, who has been with the company for nine years, also holds a qualifying license and has agreed to stay on as the license holder after the sale.

  • About 35% of revenue comes from maintenance-plan members
  • Owner holds the contractor license; the operations manager also holds a qualifying license and has agreed to stay
  • 14 employees; owner spends about 25 hours a week on sales and finance
  • Leased shop with 8 years left plus a 5-year option
  • No customer above 2% of revenue
The numbers, as presented
From the broker’s package. Nothing here has been verified.
Asking price
$1,750,000
Revenue
$3,200,000
SDE (stated)
$560,000
Multiple
3.13x SDE
YearRevenueSDE (seller-reported)
Two years ago$2,900,000$505,000
Last year$3,050,000$535,000
Most recent year$3,200,000$560,000

Add-backs in the seller’s SDE

  • Owner salary and payroll taxes$125,000
  • Owner’s health insurance and retirement contribution$26,000

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 $120,000, closing costs $55,000. A market salary to run the business is $95,000 a year, and ongoing equipment spending is $40,000 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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