Why this $1.05M deal won't take SBA money.

BY THE NUMBERS

Asking: $1,050,000

Cash flow: $605,000

Score: 3/5 - WORTH A LOOK (with major caveats)

The Deal Snapshot

Seven full-service salon locations in the Pacific Northwest. Combined annual revenue of $1.6 million. SDE of $605,000. EBITDA of $500,000. Roughly 90 W2 employees split between full-time and part-time across the locations. Combined rent of $22,345 per month on 10,500 square feet of leased retail space. All FF&E, inventory, customer databases, and brand assets included in the sale. The listing states the business is fully absentee and running on established systems with no day-to-day owner involvement.

Seller is offering a 20% carry at 6% over three years. The listing notes that SBA financing "may be less competitive" for this transaction and that the seller is seeking a quick cash sale. No broker. No CIM. Buyers receive financials and lease summaries after signing an NDA.

Bulletproof Score Card

The 80/10/10 Deal Structure

Run it as a standard 80/10/10 against an SBA lender and the math is unreal.

Your cash in: roughly $105,000 down plus closing costs and working capital. Call it $525,000 to $550,000 total to walk through the door clean.

Your annual cash flow after all debt service: $463,736 if the absentee claim holds and you don't need to add a GM line. $388,736 if you carry the $75,000 GM placeholder anyway.

You'd get your money back in under three months on the cash-flow side. The stressed DSCR clears 3.43x even after a 20 percent revenue haircut. On the listing math, this is a textbook Bulletproof deal. You can run any deal you're looking at through the same framework at DealScore Pro and see how it scores in 60 seconds.

Now here's the problem. The seller doesn't want you to run it through an SBA lender. That's not an opinion. It's in the listing.

What's Working

•       Headline cash flow is strong. $605,000 of SDE on $1.6M of revenue is a 37.8 percent margin. If the books are clean, that's a high-margin services platform with real operating leverage.

•       The structure has a margin of safety on paper. A 1.74x multiple gives you room to absorb a bad quarter, a key stylist departure, or a soft year and still service debt comfortably.

•       Seller carry is on the table. A 20 percent note is more skin in the game than the standard 10 percent. That's a positive signal if and only if the rest of the deal stands up.

•       Inventory and FF&E are included. $70,000 of inventory and $105,000 of FF&E baked into the asking price means roughly $175,000 of the $1.05M is hard asset value.

•       Multi-unit footprint is real. Seven locations, 90 W2 employees, and a 30-day transition window give an operator-buyer a real platform to expand from instead of a single-site project.

Watch Out For

•       The "Established 2024" field is the first thing you ask about. The listing says each location "has been operating for decades." The entity says it's two years old. Either this is a recent rollup of older salons under a new holding company, or the "decades" claim is broker hype. You need pre-rollup financials for each location going back five years before you trust the consolidated $605K SDE.

•       The seller is steering you away from SBA. That sentence in the listing is the most important sentence in the listing. Sellers don't avoid SBA because of "processing timelines." They avoid SBA because the books, the lease structure, or the entity history won't survive a third-party underwriter. Find out which one before you write an LOI.

•       A 38 percent SDE margin in this category is double the benchmark. Independent full-service salons typically run 15 to 20 percent SDE margin after a real payroll line. A 38 percent margin with 90 W2 employees on the books is either an exceptional operation or a creative add-back schedule. Get the Quality of Earnings report. Don't skip this.

•       No broker. No CIM. By-owner sale. A clean seven-location absentee portfolio with this cash flow would be at a broker in 48 hours. The fact that it isn't means the seller is either avoiding broker fees or avoiding a broker's diligence pass. Both possibilities matter.

•       Working capital is not disclosed. A services business with $1.6M in revenue needs roughly $400,000 in working capital to cover three months of operating expense. If that working capital isn't in the deal, add it to your cash-in number and watch your payback math change.

•       The seller's preferred structure isn't 80/10/10. A 20 percent seller note at 6 percent amortizing over three years is roughly $6,400 a month in additional debt service. If you can't get SBA on the senior debt, that 20 percent note plus whatever you pay for the senior tier in alternative financing changes the deal's economics completely.

The Analysis

Here's the thing nobody mentions when a deal has math this clean: the math IS the red flag.

I've watched a dozen buyers in the last six months chase listings that show 1.5x to 2x multiples on cash flow north of $500K. The pattern is consistent. The headline numbers come from add-back schedules that don't survive a Quality of Earnings review. Owner compensation gets added back even when the listing says "absentee." Manager salaries get reclassified as discretionary. Personal expenses get rolled into the SDE add-back column. By the time a real underwriter is done with the financials, the $605K shrinks to $350K and the 1.74x multiple becomes a 3.0x multiple. The deal you thought you were buying isn't the deal you're buying.

That's not speculation on this listing. It's pattern recognition. Combine the "Established 2024" field with the seller steering you away from SBA, the 38 percent margin, and the by-owner structure, and you have a deal where the seller knows the math won't survive third-party scrutiny. They're hunting for a buyer who will write a check on the listing numbers without verifying them. That's the entire reason "quick cash sale" appears in the description. Banks won't catch this for you. Neither will the seller.

Here's what I'd actually do if I were evaluating this. Sign the NDA. Get the pre-rollup five-year financials for each of the seven locations separately. Run a basic owner benefit calculation on each location individually before any add-backs. If the consolidated $605K SDE pre-add-backs holds up to that scrutiny across all seven sites, you have a real deal worth pursuing aggressively. If three of the seven sites are unprofitable and the consolidation math papers over them with the strongest two, you have a portfolio that needs a 30 to 40 percent price reduction and a totally different deal structure.

Twenty years ago I made this exact mistake on a smaller services rollup. The headline numbers were beautiful. The site-by-site numbers told a different story. I closed anyway because I trusted the consolidated P&L. Within eighteen months I was carrying two underperforming locations on the back of three strong ones, and the cash flow that looked bulletproof on the listing was barely covering debt. The lesson was simple. On a multi-location deal, the consolidation hides the truth. The site-level data is the truth.

Mike's Verdict

NEEDS MORE DATA. Leaning PASS until proven otherwise.

On listing math alone, this deal scores 3 out of 5 and looks like a high-cash-flow opportunity at a discount multiple. On the totality of the listing language, this deal scores PASS until the seller produces pre-rollup site-level financials, a Quality of Earnings report, and a clean explanation of why SBA financing isn't on the table. Three guardrails (no broker, no SBA path, quick-cash framing) all pointing the same direction is not a coincidence. Get the site-by-site data. If it holds up, this is a real deal. If it doesn't, you walk.

What This Means For You

If you're hunting deals right now, treat every listing with a sub-2.0x multiple as a flag for deeper diligence, not a signal to move faster. The cheapest deal on paper is usually cheap for a reason that only shows up after you've spent money on QofE.

Want to see how I stress-test every deal against cost shocks, revenue dips, and hidden liabilities before I'd put a dollar at risk? I walk through the entire Bulletproof method in a free 28-minute masterclass.

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