THE BUYER'S BRIEF - FULL DEAL BREAKDOWN
Behavior Science Consulting | Northeast US | $1,495,000
A consulting firm that generated $2.95M in revenue and $909K in cash flow is being offered at 1.64 times SDE. That's roughly half the Bulletproof ceiling. When a deal comes in that cheap, the first question isn't "should I buy it?" It's "what am I missing?"
THE DEAL SNAPSHOT
Industry | Behavior Change Science Consulting |
Location | Northeast US |
Asking Price | $1,495,000 |
Annual Revenue | $2,948,545 |
Cash Flow (SDE) | $909,362 |
SDE Margin | 31% |
Years Established | Approximately 30 years |
Staff | Under 10, including PhD-level scientists |
Seller Financing Offered | 15% seller note |
BULLETPROOF SCORE CARD
CRITERION | TARGET | ACTUAL | VERDICT |
Stress DSCR (20% rev decline) | ≥ 2.0x | 3.62x | PASS |
Purchase Multiple | ≤ 3.0x | 1.64x | PASS |
Owner Cash Flow | > $100K/yr | $633K/yr | PASS |
Working Capital (3+ mo) | $737K+ | Not disclosed | INCOMPLETE |
Clean 80/10/10 Structure | 80/10/10 | 80/15/5 offered | MODIFIED |
THE 80/10/10 SUMMARY
Running this through the standard Bulletproof structure - $1.196M SBA loan at 10.5% over 10 years, plus a 10% seller note at 5% interest-only, with 10% buyer down - the numbers are unusually clean. The seller has actually offered 15% on a note, which improves the deal further. Here are the key numbers.
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Cash In (10% down + working capital + closing) | Approximately $923,000 |
Annual Cash Flow After Debt and GM Replacement | $633,161 |
Payback Period on Down Payment | Under 3 months |
Stress DSCR at 20% revenue decline | 3.62x |
WHAT'S WORKING
The cash flow math is elite. A 31% SDE margin on $2.9M in revenue is strong for a service business, and the 1.64x purchase multiple is well below what PE pays for similar consulting work. Debt coverage is not close - the deal clears a stress-tested DSCR of 3.62x, which means revenue could fall 20% and you would still cover debt nearly four times over. The client list is institutional and sticky: health systems, health plans, federal agencies like NIH and CDC, major universities, and named corporate accounts. Staff tenure is long and deep, with most of the team having more than a decade with the company. The seller is offering a 15% note instead of the standard 10%, which is a stronger show of accountability than the typical structure requires.
WATCH OUT FOR
Two things need real diligence. First, the sellers are "actively involved, from strategic direction and administration to project oversight." In a service business with PhD-level staff and federal agency contracts, owner involvement usually means owner relationships. You need to know how much of the revenue walks out the door with them. The 1-to-3-year transition offer helps, but a formal client-retention clause tied to the earnout or seller note should be non-negotiable. Second, working capital is not disclosed in the listing. A services firm with $2.9M in revenue should carry approximately $737K in working capital to clear the Bulletproof threshold. If the sellers drain the cash before closing, the first 90 days get ugly fast. Put it in the LOI.
THE ANALYSIS
Here's what 35 years has proven: when a deal looks too cheap, one of three things is happening. Either the seller is tired and undervaluing what they built, a key customer is about to walk, or the business is more fragile than the top-line numbers suggest. In this case, I think it's mostly door number one. The sellers are planning retirement, they have built this firm for nearly three decades, and they are willing to carry more than the standard seller note and stay on for up to three years. That pattern usually signals a legacy-minded exit, not a fire sale.
But door three is where I would focus diligence. Consulting firms are people businesses. Federal agency work is relationship work. If 60% of revenue flows through two or three PhD scientists plus the founders, and those PhDs are close to retirement or already have outside offers, this deal has a staffing cliff that the financials cannot show you. Ask for a client concentration report broken down by both customer and by staff member. Ask for the renewal rate on the SaaS licensing revenue. Ask how much of the research and development funding is tied to specific named scientists rather than to the company.
The structure is also worth a second look. The seller's 15% note is a gift - it means more skin in the game post-close, which filters out sellers who are looking to walk away clean. But you should still push for a second seller note structured against client retention. A simple clause: the note is forgiven proportionally if the top five accounts stay on for 24 months. That protects you if a key client leaves and it aligns the seller's incentives during the transition. Plug different note structures into DealScorePro and watch how the owner cash flow moves - the difference between a clean-exit seller and an accountable seller is usually worth six figures over three years.
MIKE'S VERDICT
WORTH A LOOK
Score of 4 out of 5, with working capital flagged as Incomplete and the 80/10/10 structure modified in the buyer's favor. The purchase multiple is exceptional. The cash flow covers debt with room. The seller is motivated by legacy, not desperation. This is the kind of deal that rewards a prepared buyer and punishes a sloppy one. If you can structure client-retention protection into the note and get working capital confirmed in the LOI, this one is a closer look. If the broker pushes back on either ask, walk.
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