Startups and SMBs. Buying and building. Chicago Booth MBA
San Antonio, TX
Joined February 2022
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You’re buying a company with 200k SDE at a 2.5x multiple (500k price).
You end up having to inject 100k in working capital because the seller doesn’t want to include AR.
Now you’re effectively paying 3x. Instead of coming up with 500k, you need to come up with 600k.
What are some practical tips to ensure a smooth business transition post-acquisition?
For example: clients paying the right account, introductions to suppliers, get same UPS rates, etc.
A couple of deposit adjustments to keep in mind when doing a Proof of Cash:
-Intra company bank transfers
-Credit card clearing period
Intra company bank transfers
Be sure to subtract any funds that flowed between company banks or else you’ll be double counting.
Searching requires a TON of patience. Even after you sign an LOI and finish DD you still have to wait 45-60 days to close on the SBA loan.⏱️
This is definitely a marathon and those with patience will persevere.
What is an ideal timeline post LOI?
-Week 1: Buyer prelim DD (ongoing throughout)
-Weeks 2-4: QOE
-Weeks 3-4: Prepare docs for lender term sheet
-Week 4: Engage legal; receive term sheets and select lender
-Weeks 5-12: Work on loan and APA
Thoughts? @codywagee
Is there anything wrong with sending the seller 3 different options for the deal structure before submitting an LOI? Sounds like everyone goes straight into sending an LOI. What am I missing? @Sam_Rosati @ClintFiore @SMB_Attorney
Has anyone seen website management companies being sold? Wondering what multiples are typical in that space. @ClintFiore @SMB_Attorney @PlaybookAdvisor @SBALenderLyons
Deep in the rabbit hole on a Friday night. Great thread.
Highly recommend @Sam_Rosati if you’re even thinking of doing a self funded search. Listen to all of his podcast appearances, follow him on Twitter. You’ll be ahead of the curve.
Lots of very talented people here on SMB Twitter…
What are the best resources to improve my sales skills? Willing to spend 1 hour/day on theory + multiples hours of practice.
Do buyers usually get the opportunity to talk to customers during DD? @ClintFiore @ElliottEHolland
Does anyone have a subcontractor agreement they could share? @Stetson11QB who else might have one?
@baldridgecpa if I’m starting a business from scratch who should I talk to for advice on which business structure to choose and tax planning (which expenses I can roll into the business, employing or adding my wife as an equity partner, etc.)?