What this section means
This is the simple snapshot: what the business is, what the seller wants, what the seller claims it earns, and the first-pass OwnerPath decision.
Sample Deal Walkthrough
Mountain West HVAC Services
Recommended next move
Reprice near $1.14M and request the addback, payroll, lease, and customer proof before offer talk.
At $1.25M, you may overpay by about $110k–$170k based on current proof. Each $10k of unsupported cash flow is worth about $30k of price at the seller's 3.05x asking multiple.
Beginner decisionPrice looks too high
ConfidenceMedium
Supportable offer$1.08M-$1.14M
This sample shows how OwnerPath teaches while it analyzes. The business may be worth a broker call, but the asking price does not work after unsupported seller adjustments are removed. The buyer should not submit an early offer letter until tax returns, payroll, addback support, lease transfer, and lender comfort are reviewed.
1. What This Deal Is
What OwnerPath found
HVAC service company, $1.25M asking price, $1.82M revenue, $410k seller-claimed cash flow, and a price-looks-too-high recommendation.
Why it matters
The asking price only makes sense if the seller's cash-flow claim is real and financeable.
What to ask next
Ask the broker to reconcile $410k of SDE to filed returns; prove the owner auto, family payroll, legal, and travel addbacks; identify who replaces the seller; provide the full lease; and state the largest-customer and top-ten shares.
2. Plain-English Terms
Seller cash flow (SDE)
The seller's claimed yearly owner benefit before your loan payment. It is useful, but it needs proof.
Loan-payment cushion (DSCR)
Whether the business appears to make enough money to cover loan payments with room to spare.
Seller adjustments
Expenses the seller says should be added back to profit. Some are real. Some are not.
Early offer letter (LOI)
A non-final offer letter. Have important terms reviewed before signing.
3. Key Numbers
Asking price$1.25MWhat the seller wants.
Revenue$1.82MSales before expenses.
Seller cash flow$410kSeller's profit claim.
OwnerPath adjusted cash flow$318kMore cautious view after weak adjustments.
Payment cushion at asking1.11xThin for debt payments.
Supportable offer range$1.08M-$1.14M95%–100% of the 1.25x maximum.
4. Seller Cash Flow Check
What this section means: OwnerPath does not treat every seller adjustment as real profit. It reduces cash flow when adjustments are unsupported, recurring, personal, or not tied to documents.
| Seller adjustment | Seller claim | OwnerPath treatment | What could go wrong |
|---|---|---|---|
| Owner auto | $18k | $8k accepted | Personal use may not be fully removable. |
| Family payroll | $42k | $0 accepted | Payroll may be needed to replace real work. |
| One-time legal | $21k | $21k accepted if documented | Needs invoice or tax support. |
| Travel/meals | $16k | $4k accepted | May be normal business expense. |
| Market-rate manager replacement | Not included | $28k deducted | The family-payroll adjustment does not fully cover the cost of replacing the seller's operating work. |
| Total adjustment | $97k claimed addbacks | $64k addbacks removed + $28k replacement labor = $92k | $410k − $92k = $318k adjusted cash flow. |
5. Payment Check
Why it matters: A business can look profitable but still fail if debt payments consume too much cash. OwnerPath estimates payment cushion, but a lender must verify repayment ability and eligibility.
Buyer cash$125k
Seller note$125k
Bank/SBA-style loan$1.0M
Annual debt payment$286k
Cushion at asking1.11x
Cushion at $1.14M maximum1.25x
Payment assumption: the $125k seller note is on full standby with no current payments; the $286k at asking and every lower-price cushion include bank-loan payments only.
$286k annual debt payment × 1.25 target cushion = $357.5k required cash flow at the asking price.
$318k ÷ 1.25 = $254.4k maximum debt payment; at the modeled payment rate that supports an $889.5k loan, plus $250k buyer cash and seller note.
How we got this
$410k seller cash flow − $64k rejected addbacks − $28k replacement manager = $318k adjusted cash flow. $318k ÷ $286k annual bank debt payment = 1.11x. At $1.14M, modeled annual bank debt is about $254.4k and $318k ÷ $254.4k = 1.25x. At the $1.08M low end, modeled bank debt is about $237.4k and the cushion is 1.34x.
6. Proof Needed
- Three years filed tax returns
- Monthly P&Ls
- Addback support
- Payroll register
- Lease and assignment clause
- Customer concentration report
- Employee roster
- Seller role and weekly hours
7. Red Flags
Cost: $92k less annual cash flow changes both price and debt safety.
Resolve: Addback schedule, general ledger, invoices, filed returns, and payroll register.
Cost: A $39.5k annual coverage shortfall leaves little room for surprises.
Resolve: Written lender terms and tax-return cash flow of at least $357.5k.
Cost: Lost premises or worse rent can impair operations and value.
Resolve: Full lease, amendments, assignment clause, and landlord consent requirements.
Cost: Losing one large account could erase the debt cushion.
Resolve: Revenue-by-customer report for three years showing top-one and top-ten shares.
8. Questions To Ask The Broker
Can you reconcile the $410k SDE to three years of filed returns and monthly P&Ls, and tie the $18k owner auto, $42k family payroll, $21k legal, and $16k travel/meals addbacks to the general ledger and supporting documents?
Which duties and weekly hours must replace the seller, and does the payroll register include market pay for that role? Please also provide the complete lease and amendments, landlord-consent requirements, and three years of customer revenue showing the largest-customer and top-ten shares.
Draft-only reminder: Review before sending. OwnerPath does not send broker emails automatically.
9. What Not To Do Yet
Do not submit an offer letter yet
The proof package is incomplete.
Do not trust the seller cash flow yet
Unsupported adjustments changed the deal math.
Do not assume financing is available
The lender must verify repayment ability, eligibility, and buyer fit.
Do not skip attorney review
Lease transfer, offer terms, closing conditions, liabilities, and contracts matter.
Professional-Review Warning
OwnerPath is decision-support software. It is not legal, tax, accounting, lending, valuation, brokerage, insurance, or investment advice. Verify outputs with source documents and qualified professionals before submitting an offer, signing documents, or closing.