Buying Small to Build for the Long Term ($300k SDE)

That's true, but sure, sure.

I guess one, one more definitive way to put it is if there's a lot of employee turnover, you know, where there's smoke, there's probably fire there. So definitely use that as a negative signal. Okay, the purchase price, please.

And the purchase also included roughly 175,000 of cash being left in the business because I was, you know, talking to banks. It really wasn't going to make sense to do a loan and working capital and all that kind of stuff. And I, I, you know, Tony and I had talked about this and that's where you know, originally I'd been speaking about doing the classic self funded search, SBA loan, blah blah,…

But as I went down that path, I just told, I, I was just honest with Tony. I was like, hey, you know, this isn't really going to make sense this way. We could still do it, but it would look, look, you know, something like this.

Actually originally we started with 100 sell it out and, and originally he was like, oh yeah, you know, okay. But then he's like, you know, I talked to my wife and she was like, well wait, so you're telling me this person's not giving you anything like up front, like, you know, like wanted money down more as a gesture of goodwill than anything. Which, you know, made a lot of sense.

So that is, you know, at a high level the structure that we came to.

Yeah, and oh, and what was the, what were the terms of that seller note?

The seller note was so it's 10 years, 10 plus years, 5% interest rate, straight line amortization.

Okay. So this is a very small business. There's a lot of risk in it. But this is a very strong purchase price.

And, and in particular structure, so the purchase price was, you know, depending on how we define the earnings, something over 2, a little bit over 2 of SDE. If we talk about adjusted EBITDA, that 150,000 true kind of free cash flow coming off the business, it's more like 4ish. But we should really reduce that purchase price by the 170, 175 that was left in the bank as working capital.

Usually these, you know, these businesses are debt free, cash free. So there's no cash that's, that's coming along or you, or you have to negotiate it. But the idea that you'd step into a business with $175,000 just sitting on the, on the bank, bank balance sheet of the bank of the, of the business is effectively like the purchase price was, was reduced by set amount.