How to Analyze a Business Acquisition in Under 15 Minutes
Evaluating 10+ business acquisition opportunities a week demands a system. Here is the first-pass triage framework Marss uses to screen cash-flowing businesses — from CIM receipt to Go/No-Go in 15 minutes.
What Asset Classes This Covers
This framework applies to essential operating businesses anchored by real estate. The real estate component is critical — it provides the downside floor that makes creative financing structures viable.
Step 1: Extract the Right Financial Metric
The CIM will quote a number. Your job is to figure out which number it actually is and verify it independently.
Net Income
Bottom-line after all expenses, taxes, interest, and depreciation. Starting point — not your valuation metric.
EBITDA
Use ThisEarnings Before Interest, Taxes, Depreciation, and Amortization. The primary institutional valuation metric. Removes non-cash and financing charges to reveal operating cash generation.
SDE (Seller's Discretionary Earnings)
Use ThisEBITDA plus owner compensation plus personal add-backs (owner car, personal insurance, etc.). Primary metric for owner-operated businesses under $2M revenue. Reflects total economic benefit to a single owner-operator.
Reconcile immediately: Compare EBITDA or SDE from the CIM against trailing 12-month bank deposit statements. If they diverge by more than 5%, ask for the explanation before going further. Unexplained gaps are the most common source of post-close surprises.
Step 2: Validate Add-Backs
Add-backs inflate SDE and EBITDA. Not all add-backs are equal. Classify each one:
- • Owner salary above market replacement cost
- • One-time legal or accounting fees (documented)
- • Non-recurring equipment repair (documented)
- • Personal vehicle expensed to business (documented receipt)
- • "Cost savings we plan to implement"
- • Revenue from contracts not yet executed
- • Owner salary below market replacement cost
- • Related-party rent below market rate
Step 3: Apply the Valuation Multiple
Compare the asking price against what the market actually pays for businesses in this category. Source your multiples — never guess.
| Business Type | SDE Multiple | EBITDA Multiple |
|---|---|---|
| Gas Station / C-Store | 1.5x – 2.5x SDE | 3x – 4.5x EBITDA |
| Car Wash (tunnel) | 4x – 6x EBITDA | (institutional scale) |
| Auto Dealership | 2x – 3.5x SDE | 3x – 5x EBITDA |
| HVAC / Plumbing Service | 2x – 3.5x SDE | 3x – 5x EBITDA |
| Motel / Limited-Service Hotel | 4x – 6x EBITDA | (RE drives value) |
| Laundromat | 2x – 3.5x SDE | 3x – 4.5x EBITDA |
| Self-Storage | Cap rate basis | 5x – 7x NOI |
| Light Manufacturing | 2.5x – 4x SDE | 3.5x – 5.5x EBITDA |
Source: BizBuySell transaction data, IBBA Market Pulse, Pepperdine Private Capital Markets Report. Multiples vary by location, operator dependency, transferability, and revenue concentration.
Step 4: Run the Stress Test
Apply -10% and -20% revenue shocks to your EBITDA or SDE. At each stress level, confirm:
Step 5: Operator Dependency Check
This is the most underweighted risk in small business acquisitions. Ask:
What percentage of revenue is relationship-dependent on the owner?
What is the largest single customer concentration?
Are licenses and permits transferable?
Who manages day-to-day operations?
Step 6: Go / No-Go Decision
- • EBITDA ≥ $500K on verified T-12
- • Asking price ≤ 5x EBITDA (or justified)
- • DSCR ≥ 1.40x at senior debt terms
- • Operator dependency < 25%
- • Licenses transferable confirmed
- • EBITDA $350K–$499K with RE anchor
- • Price 5–6x EBITDA with strong thesis
- • DSCR 1.25–1.39x baseline
- • Dependency 25–35% with transition plan
- • One document missing
- • EBITDA < $350K
- • T-12 doesn't reconcile to deposits
- • Price > 6x EBITDA without justification
- • DSCR < 1.20x at -10% stress
- • Dependency > 40% undocumented
Submit to Marss for Full Underwriting
We evaluate gas stations, car washes, auto dealerships, motels, HVAC businesses, laundromats, and more. LOI within 48 hours. Commission protected for brokers.