A marketing firm asking $455,000 has $120,000 in net profit on $220,000 revenue. At full leverage, debt service runs $110,000 yearly. But if the owner and three contractors aren't paid from that profit, you're left with $10,000 a year to live on, which doesn't justify the risk.
So again, if I'm looking at this marketing company, it's producing $120K bottom line, gross revenue is $220K. I can just type in, okay, what's their asking price, right? The asking price is $455K. Let's just assume I'm gonna get this fully leveraged. Well, just my debt payments alone are gonna be $110,000. Now that's more of a traditional on like a 10-year term, right? You can use this kind of math to negotiate with them. This doesn't have to be the end-all be-all because If my debt payments are $100,000, let's call it $111,000, and they're only producing $120,000, I would want to know first if the owner's included in that, their wages are included in that or not. Looks like they have 3 contractors, but if they— let's just assume they're not included. Well, even if they're not included, $10,000 a year is not enough. Like, how am I going to get paid, right? Like, I'm not going to get— I'm not going to do all this work and take all this risk for $10,000 a year. Like, it doesn't make sense.
