TUESDAY | DEAL BREAKDOWN
TL;DR: A home-based marketing agency with eleven years of operating history and SBA pre-qualification scores 4 out of 5 on the Bulletproof criteria. If the disclosed SDE is real. At a 52 percent SDE margin on $724K of revenue, this number is roughly double the industry benchmark. Mike Warren breaks down the deal math, the margin question, and the single diligence demand that decides whether this is Worth a Look or a soft pass.
Marketing agencies don't run at fifty-two percent SDE margins.
The industry benchmark is fifteen to twenty-five percent. Even the leanest virtual operators top out around thirty. This listing reports $375K in SDE on $724K in revenue. That number is the deal.
BY THE NUMBERS
Asking: $1,000,000
Cash flow: $375,000 (as disclosed, see analysis)
Score: 4/5, WORTH A LOOK
The Deal Snapshot
Industry: Branding and marketing agency, niche B2B focus
Location: Middle Tennessee, fully relocatable
Established: 2014 (eleven years)
Asking Price: $1,000,000
Gross Revenue: $724,125
Cash Flow (SDE): $375,000 as disclosed
Employees: 1 full-time, 1 contractor, additional contractors as needed
Facility: Home-based, virtual operating model
FF&E included: $21,210
Financing: SBA pre-qualification letter from Cogent Bank included
Owner training: 2 weeks
Bulletproof Score Card
Criterion | Target | Actual | Verdict |
DSCR (stress-tested) | ≥ 2.0x | 2.23x | PASS |
Purchase Multiple | ≤ 3.0x | 2.67x | PASS |
Owner Cash Flow | > $100K/yr | $165,551 | PASS |
Working Capital | 3+ mo revenue | Not Disclosed | INCOMPLETE |
80/10/10 Structure | Clean | SBA Pre-Qual | PASS |
The 80/10/10 Deal Structure
Run this through the standard structure and the headline numbers cooperate. The SBA carries $800K at 10.5 percent over ten years. The seller carries $100K interest-only at 5 percent. You put $100K down on an eleven-year agency that already has its bank pre-qualification in writing.
Your cash in: roughly $306,000 (down payment, three months working capital cushion, closing costs)
Your annual debt service: $134,449 (SBA $129,449 plus seller note $5,000)
Your annual cash flow after debt: $240,551 on disclosed SDE
Your owner cash flow after a $75K GM replacement: $165,551
Your payback on the down payment: roughly 7.2 months
I ran this through the Bulletproof calculator at DealScore Pro. DSCR comes in at 2.79x. Stress it at a 20 percent revenue decline and it holds at 2.23x. Multiple lands at 2.67x SDE. Owner cash flow clears the $100K floor by sixty-five thousand dollars. On the listed numbers, four of five criteria pass.
That's the math the listing wants you to anchor on. Now let's talk about whether the math is real.
What's Working
Multiple inside Bulletproof ceiling. At 2.67x disclosed SDE, the seller hasn't priced this for a strategic acquirer. Even if real SDE proves lower, there's room to negotiate without the deal collapsing.
Eleven years operating history. A 2014 founding date means this survived COVID, a marketing recession in 2023, and the shift to AI-generated creative. The 46 percent revenue growth since 2022 is the kind of post-COVID rebound that holds up.
Virtual, home-based, relocatable. Zero rent. Zero geographic constraint. A buyer in Austin or Atlanta can run this without moving and without taking on lease overhead. The cost stack is essentially payroll plus software.
SBA pre-qualification in writing. Cogent Bank has already underwritten this deal at the listed numbers. That's three weeks of diligence the seller has done for you, and it tells you the bank's tax-return review didn't blow up the SDE story.
Watch Out For
The margin is the deal. $375K of SDE on $724K of revenue is a 52 percent margin. The industry benchmark for owner-operator agencies is 15 to 25 percent. Even lean virtual shops top out around 30. Demand the full SDE workup with every add-back itemized. If owner comp adds back $150K and family-on-payroll adds back $40K, real ongoing SDE could be closer to $185K, which moves the multiple to 5.4x.
Two-person operation, niche client base. One full-time employee plus the owner plus a contractor doesn't deliver a million dollars of SDE on its own. The owner is the rainmaker, the strategist, and probably the creative director. Without him, the agency is a Rolodex and a server. The two-week transition isn't enough.
Client concentration not disclosed. A $724K agency “catering to a niche market” with one full-timer almost certainly runs on three to five anchor clients. If the top account is 40 percent of revenue and they leave when the owner does, the SDE goes with them.
Working capital not addressed. Agencies live on receivables. A 90-day AR cycle on $724K is $181K. The listing doesn't say whether the seller is leaving working capital at close. Get that in the LOI before you sign anything.
The Analysis
Here's the thing nobody mentions on a deal like this one. The Bulletproof score is 4 of 5. Multiple passes, DSCR passes, owner cash flow passes, structure passes. The only INCOMPLETE is working capital, which is solvable in the LOI. On paper, this is one of the cleanest Tuesday listings I've looked at in a month.
Watch what happens when you do the actual diligence on the SDE.
Tennessee agency revenue benchmarks land at 15 to 25 percent SDE margins for owner-operator shops. The listing is reporting 52 percent. That isn't a small variance. That's the kind of number that either reflects extraordinary execution, which the listing would normally feature, or extensive add-backs that won't transfer to a new owner. Banks won't catch this for you. Neither will the broker.
I had a buyer call me about an agency deal nearly identical to this one last quarter, different region, virtual model, similar revenue. The SDE looked clean. Then we got the add-back schedule. Owner's wife on payroll, $40K. Owner's car, insurance, and fuel: $15K. Travel: $22K. Health insurance for the family: $28K. A consulting payment to a related entity: $30K. None of those costs would disappear for a new buyer who didn't have a working spouse or a related consulting entity. Real ongoing SDE was about thirty-five percent below the listing. The deal still made sense at a lower price. It didn't make sense at the asking.
After 35 years of looking at these, the test that matters on agencies is simple. Ask for the bank's underwriting workup. If Cogent Bank pre-qualified the SBA loan, they wrote a credit memo. That memo includes the add-back schedule the bank accepted. Get it. Read it. The bank is more conservative than the seller, and what survived their review is your real working SDE. The gap between that number and the listed $375K is your negotiating room.
That's the question every agency buyer should ask first.
If the SDE holds up under scrutiny, this is one of the better Tuesday deals to come across in weeks. SBA pre-qualified. Multiple at 2.67x. Stressed DSCR over 2x. Virtual, relocatable, low overhead, clean transition mechanics. The play is straightforward: keep the existing FTE, retain the contractor, use the working capital to fund a second hire in month four, and grow into the capacity the current owners are intentionally leaving on the table. The listing says they turn away clients. Verify that, and you've found the upside that justifies the multiple.
If the SDE doesn't hold up -if real ongoing earnings prove to be $200K rather than $375K - the asking price needs to come down by about $400K to make the math work. Negotiate from the bank memo, not the listing.
Run your own numbers through DealScore Pro before you submit an LOI - the SDE input is the single line that decides whether this is a 4/5 or a 2/5.
Mike's Verdict: NEEDS MORE DATA
This scores 4 out of 5 at the listed numbers, which on paper makes it Worth a Look. In practice, the disclosed SDE is roughly double the industry benchmark for an agency of this size, and that single line determines whether the rest of the math holds. The path forward is two-step. First, demand the SBA underwriting memo from Cogent Bank and the full add-back schedule. Second, get working capital language in the LOI. If true ongoing SDE clears $300K and three months working capital stays in the business at close, this becomes a real deal at the asking price. If true SDE comes in closer to $200K, the price needs to drop to about $600K to keep the multiple inside Bulletproof range. Either way, the bank memo decides.
What This Means For You
If you're hunting agency or services deals right now, never accept the seller's SDE number at face value. Get the bank's add-back schedule from any pre-qualification letter, compare it to industry-typical margins, and use the gap as your negotiating room. Lenders are more conservative than brokers. Their number is closer to your number.
— Mike
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