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- Feb 15, 2022
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SDE for three years: $130K, $130K, $500K. Hopefully, the multiple is $250K * 2 = $500K purchase price.Any advise on approach, structure of the deal, common pitfalls, or experience in the industry would be highly appreciated,
If the purchase price is based only on last year's peak earnings, the 2x multiple doesn't sound too great. The problem with big revenue jumps is you really have to understand what made that possible and whether it's sustainable. Unfortunately, it's pretty common - and not too difficult - to artificially pump up revenue to increase the sale value.
Good answers would be more effective marketing, better conversions, higher sales. Bad answers would be front loading multiple year contracts into 2021, low balling new accounts, switching to accrual vs. cash, one-time revenue bumps.