Plumbing Service Company
This analysis follows the BAM Analysis Framework, evaluating Earnings Quality, Capital Structure Sustainability, Operational Risk Exposure, and Upside Potential.
Deal Snapshot
Industry: Residential Plumbing
Revenue: $1,450,000
Seller’s Discretionary Earnings (SDE): $380,000
Asking Price: $1,050,000
Location: Southwest U.S.
Valuation Analysis
$1,050,000 ÷ $380,000 = 2.76x SDE
This sits within a reasonable market range for a skilled trade service business with recurring service demand.
SBA Loan Scenario (10% Down)
Down Payment: $105,000
Loan Amount: $945,000
Estimated Annual Loan Payment: ~$140,000
Projected Owner Income After Debt:
$380,000 – $140,000 ≈ $240,000
Debt Service Coverage Ratio (DSCR)
$380,000 ÷ $140,000 ≈ 2.71x
This indicates strong lender coverage and cash flow cushion.
Operational Risk Factors
• Skilled labor dependency
• Licensing requirements
• Service vehicle replacement costs
• Seasonality spikes
Upside Potential
• Expansion of preventative maintenance programs
• Upselling water heater and repiping services
• Geographic expansion within service territory
• Improved scheduling efficiency and route density
Downside Stress Scenario (15% Revenue Decline)
If revenue declines 15%, projected revenue would decrease to approximately $1,232,500.
Assuming proportional margin compression, adjusted SDE may decline to approximately $323,000.
Revised DSCR:
$323,000 ÷ $140,000 ≈ 2.30x
Even under moderate revenue contraction, debt coverage remains above lender minimum thresholds.
Capital Structure Assessment
At 2.76x SDE with strong projected coverage, the capital structure appears sustainable under current operating assumptions.
Sustainability is dependent on technician retention and licensing continuity.
BAM Risk Profile
Earnings Stability: Moderate
Capital Structure Strength: Low
Operational Exposure: Moderate
Revenue Volatility Sensitivity: Moderate
Overall Risk Tier: Moderate
Investment Thesis
This opportunity presents meaningful post-debt income potential with acceptable structural leverage.
Operational durability should be verified during due diligence.
Strengthen Your Acquisition Foundation
If you’re new to evaluating service businesses, start here:
• Can You Afford to Buy a Business?
• Understanding Revenue vs. SDE
• How SBA Loans Actually Work
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