Buying a $1.6m Business for the Inventory Value

Great. Now you said that you and the owner in your first zoom call, Kyle was there too. Then Kyle had to go to dinner, so he shut his laptop and hopped off. You continued talking to the seller.

You get off the phone with the seller, you text Kyle and say, I really like this one. Kyle says, put an LOI on it. Why are, is Kyle so enthusiastic about it?

You know, we knew that it probably, probably should have been at a 3x multiple minimum since the owner was so removed from the day to day operations. But, and I can't speak factual on this, I just assume that the broker maybe took it as a cyclical industry and maybe that was a high risk and maybe priced it as such just to help get the sale across the finish line sooner than later.

But it was really just kind of packaged at a purchase price essentially for the inventory and the assets that were provided. How much in the way of inventory and assets were there? There was about 650,000 on the balance sheet for assets.

And I think the, the purchase price was advertised on biz by sell for 780,000 for the business. 780,000. And it was SDE of 400 a year. So purely by an SDE based on an SDE multiple, it was less than 2x for a business that was pretty established, you know, and as you said remotely run, the owner was, was not even in, in the day to day. Yep.

So as we talked about in the pre call, that's, I think that's probably why Kyle was so excited. I mean all the other reasons to like it, but to like it as well. But that is, you just don't hear about that very often.

So. In fact what you'll often hear is, is sellers, what they'll try to do is, is sell it at A multiple based on earnings or based on sd and then say, plus inventory, and they expect you to pay inventory separately. Now, that doesn't really work because the inventory is the oxygen of the business, and some. But in this case, it was almost like, just sell the inventory and get.

The business for free, what it felt like. So. So. So you Pay. You said 780. 780 was the purchase price, and then the entire loan included working capital. At the end of the day. How much working capital did you put in?

I think 160,000 I got in working capital. So that takes us to 940. Does that sound right?

It was a 940. It was around 880,000 is what my SBA loan, but. Oh, I had a down payment, though, so. Yeah, yeah, yeah, that makes sense.

Okay, okay, okay, great. The down payment. Can you share with us what that was and where that came from?