Acquiring MindsOctober 21, 2024

Small SDE, Big Upside: Buying a Business with 5 Employees

with Kristiana Laugen · RD Pools, Spas & Fountains

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LenderHawk analysis. Not affiliated with or endorsed by Acquiring Minds.

The Deal

Business

RD Pools, Spas & Fountains

Industry

pool cleaning business / home services

State

Purchase Price

$920K

Multiple (SDE)

3.1x

Year

2024

Revenue at Purchase

$675K

SDE at Purchase

$300K

LTV at Close

85%

Deal Source

broker

Financing Structure

Buyer Equity

SBA 7(a)

Seller Note

Strategic Rationale

Targeted for its 40-year longevity and the seller's willingness to stay on as a licensed partner.

Post-Acquisition Performance

Immediate implementation of tech; high turnover of tech staff to improve quality.

Key Takeaways

1Avoid making too many operational changes too quickly after acquisition; spacing changes reduces unnecessary stress despite being the right moves strategically.
2Clearly articulate specific value-add opportunities before acquiring a business rather than assuming optimization possibilities exist without identifying them.
3Small businesses with long operational histories and stable customer bases can be lower-risk acquisitions than their SDE size alone suggests, particularly for buyers with sufficient financial runway.
4The 2023 SBA rule change enabling seller equity retention without seller notes creates valuable partnership flexibility for licensed businesses where the seller must remain involved.
5Building a strategic hiring funnel and offering competitive compensation enables faster growth and staffing improvement even in challenging skilled trades markets.

Matched SBA Loan Records

SBA loan filings we matched to this deal

U.S. Bank, National Association62%

$772KP + 1.00%FY2024

U.S. Bank, National Association62%

$50KP + 3.00%FY2024

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The Deal

Business

RD Pools, Spas & Fountains

Industry

pool cleaning business / home services

State

Purchase Price

$920K

Multiple (SDE)

3.1x

Year

2024

Revenue at Purchase

$675K

SDE at Purchase

$300K

LTV at Close

85%

Deal Source

broker

Financing Structure

Buyer Equity

SBA 7(a)

Seller Note

Strategic Rationale

Targeted for its 40-year longevity and the seller's willingness to stay on as a licensed partner.

Post-Acquisition Performance

Immediate implementation of tech; high turnover of tech staff to improve quality.

Key Takeaways

1Avoid making too many operational changes too quickly after acquisition; spacing changes reduces unnecessary stress despite being the right moves strategically.

2Clearly articulate specific value-add opportunities before acquiring a business rather than assuming optimization possibilities exist without identifying them.

3Small businesses with long operational histories and stable customer bases can be lower-risk acquisitions than their SDE size alone suggests, particularly for buyers with sufficient financial runway.

4The 2023 SBA rule change enabling seller equity retention without seller notes creates valuable partnership flexibility for licensed businesses where the seller must remain involved.

5Building a strategic hiring funnel and offering competitive compensation enables faster growth and staffing improvement even in challenging skilled trades markets.