How to Buy $1.2 Million Business for $925K and Make It Work

Okay, let’s break this down. In a recent episode of Acquiring Minds, Carley Mitus and her partner Alex bought a home inspection business. The original asking price? $1.2 million. The final price they paid? $925,000. Not bad, right? They’re walking away with a business that has some serious potential but, as with any business acquisition, this is just the start of their journey. Let’s take a closer look at how a deal like this worked:

The Deal

So, here’s the setup: this home inspection business is bringing in about $800,000 in revenue each year, with $380,000 in seller’s discretionary earnings (SDE). That’s a pretty healthy number for a small business. However, Carley and Alex didn’t just walk in and hand over a check for $925,000. No, they had to get creative, and that’s where the SBA loan came in.

Carley and Alex put down 10% of the purchase price (5% each), which is pretty common for SBA loans. So that’s $92,500 out of their own pockets, with the remaining $832,500 financed through the loan, which comes with an interest rate of 8.99% over 10 years. They’ll be paying about $126,000 a year in debt payments. It’s a big commitment, but it’s the price of getting into the game. And the debt payment is about a 3x debt coverage ratio, leaving about $254,000 for Carley and Alex to play with. Pretty nice “cap table” no?

It’s About Relationships

But here’s where it gets interesting. The seller was originally asking for $1.2 million, which was way above what an independent CPA thought the business was worth — that CPA came in with a valuation of just $685,000. The SBA lender came in at $980,000. Carley and Alex ended up offering $925,000.00. This just shows the range of value opinions in the space. So how did they get the seller to accept their lower offer? Well, it turns out that the seller was pretty impressed with Carley and Alex from the get-go. The seller felt comfortable with them, and sometimes that’s worth more than any cold, hard valuation. It’s one of those cases where people-to-people relationships played a huge role, if not the biggest role, in the deal.

But let’s not kid ourselves: just because the deal looks great on paper doesn’t mean it’s going to be a walk in the park.

Managing the Transition

Now, after the deal was done, Carley and Alex didn’t just kick back and wait for the money to roll in. No, no — they rolled up their sleeves and got to work. Their focus shifted to relationship management with inspectors and real estate agents, which is key to keeping the business running smoothly after a transition. The business had some friction with the staff due to communication issues from the previous owner, so Carley and Alex needed to step in and make sure everyone was on the same page.

Carly, in particular, is spending a lot of her time networking, attending meetups, and making sure the communication lines with the team are wide open.

The Road Ahead

Carly and Alex bought a small business with a solid foundation with a profitable business model and high margins. But as with any small business, there’s a ton of work ahead. Now, you’ll argue an asset-light small business at 2.4x SDE and 3x debt coverage is a unicorn, but Carley and Alex are proof they exist.

At the end of the day, if they put in the work and manage the transition properly, this could be the start of something great. They’re on the path to financial independence. Carley and Alex have shown the art of the possible in this end of the SMB/ETA space.