EBIT Newsletter 006

Newly Listed Deals

Machine Shop & Tool Rebuilding Business

A well-established and very profitable machine shop specializing in CNC automating and tool rebuilding with a strong relationship in the industry.

• 📍 Location: Pittsburgh, PA

• 💰 Asking Price: $0.9M

• 💼 Cash Flow: $0.42M

• 📊 Revenue: $1.06


• ℹ️ Source: Business Broker

• ⌛ Listed: Days Ago

Overview: Established in 1990, this reputable and profitable machine shop in Pittsburgh, Pennsylvania, specializes in machine tool rebuilding, CNC automation, remanufacturing, and way alignment. Serving primarily machine shops and manufacturing businesses, the company has built a strong reputation over nearly three decades for overhauling equipment and providing technical support to enhance performance and productivity. Services include refurbishing worn or underperforming machines, updating outdated CNC controls, solving complex machine tool issues, maintaining equipment, and automating older, robust machinery. The current owner, an experienced Tool & Die Maker, is open to remaining with the company post-sale to ensure a smooth transition. The business operates from an owned property, which is available for sale or lease. With minimal competition in the Tri-State area, this opportunity is ideal for individuals or companies in the machine shop industry, large manufacturers with machine tools, or professionals in mechanical engineering. The owner is considering retirement and seeks a buyer to continue the company's legacy of excellence.

Commercial Debt Collection Business

Established agency specializing in commercial debt collection services since 2006.

• 📍 Location: Ventura County, CA

• 💰 Asking Price: $3.05M

• 💼 EBITDA: $0.73M

• 📊 Revenue: $1.56M

• ℹ️ Source: Businesses for Sale

• ⌛ Listed: 2 Days Ago

Overview: Established in 2006, this reputable and highly profitable (47% margin) commercial collections agency in Ventura County, California, specializes in recovering outstanding receivables for businesses across various industries. The company has built a strong reputation for professionalism, ethical collection practices, and high recovery rates, serving as a trusted partner for clients aiming to improve cash flow and reduce bad debt exposure. The business is not location-dependent, as several employees work remotely. Growth opportunities exist through the addition of marketing and sales personnel, as the primary source of new business currently comes from client referrals. The owner is seeking retirement and is willing to stay on temporarily to ensure a smooth transition.

Car Wash Business

Established carwash business with nearly 50% profit margin.

• 📍 Location: Brooklyn, NY

• 💰 Asking Price: $1.75M

• 💼 Cash Flow: $0.63M

• 📊 Revenue: $1.30M

• ℹ️ Source: Businesses for Sale

• ⌛ Listed: 3 Days Ago

Overview: This highly profitable car wash in Brooklyn, New York offers both automatic and hand wash services, featuring a 60-foot automated hand wash system that averages $26 per car. Operating with very low rent and equipped with well-maintained, modern equipment valued at $450,000 (included in the asking price of $1,750,000), the business enjoys a prime location with minimal local competition. The current owner is retiring and is willing to provide support and training to ensure a smooth transition for the new owner.

SMB Industry Insights

• Financing: Optimize your lender selection to avoid banks that might re-trade on terms post proposal @SBA_Matthias

• Financing: Debunking myths: SBA loans can close within 75-90 days with an experienced lender @lawyer4SMBs

• Financing: Leverage SBA’s Preferred Lender Program to get approved in 24 hours vs. 3 weeks @theSMBInvestor

• Business Management: Discover how Andrew Morrell scaled his HVAC business to $6M in revenue @WilsonCompanies

• Operations: Owner role intensity often overlooked in small business acquisitions @TheSMBInvestor

SDE vs. EBITDA vs. Cash Flow

In a recent Big Deal Small Business blog post, they highlighted three key profitability metrics that provide different but essential insights when evaluating small and medium-sized businesses. Let's break them down:

First, there's Seller's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Think of this as the business's raw operating performance, stripped of financial engineering and accounting complexities. It removes things like how much debt the company has or how they've chosen to depreciate their equipment, giving you a clearer picture of the core business operations.

Then we have Seller Discretionary Earnings (SDE), a metric unique to small business transactions. Unlike large corporations where owners are typically hands-off investors, small business owners often wear multiple hats and run personal expenses through the business. SDE adds back these owner-related costs to show the true earning potential. For example, if two identical businesses show the same EBITDA but one owner takes a $200,000 salary while another takes $100,000, SDE reveals their actual comparable profitability.

Most importantly, there's Buyer's EBITDA – what you'll actually see after taking over. This is where reality sets in. You'll need to subtract costs for replacing the owner's roles (like hiring a new salesperson), your own salary, and any new operating expenses. A business showing $500,000 in SDE might only generate $300,000 in Buyer's EBITDA once you factor in these real-world costs.

The cash flow picture has its own nuances. Unlevered Free Cash Flow shows what's available before debt payments, while Levered Free Cash Flow reveals what's left after paying lenders. The final number – Distributable Free Cash Flow – is what you can actually take home or reinvest.

Here's a vital insight many buyers miss: Two businesses can have wildly different EBITDA multiples but offer identical returns. For instance, a business selling for 5.6x EBITDA might generate the same cash flow return as one selling for 3.9x EBITDA, simply because banks view one as less risky and offer better financing terms. This is why comparing EBITDA multiples only works well within the same industry, where businesses typically have similar risk profiles and capital structures.

The key takeaway? Look beyond traditional valuation multiples. Focus on cash flow yields and make sure you understand the true cost structure you'll inherit as the new owner. The most attractive purchase price means nothing if the business can't generate the cash flow you need to service debt and make a living..

Click here to view the full blog post.

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