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Lesson · Business · acquisition

Don't build it. Buy it.

Buying an existing business means buying cash flow that already works. The skill is reading the deal — what makes one a bargain and another a trap you'll regret.

3.3X
MULTIPLE IF INVENTORY IS STACKED ON TOP OF PRICE

THE ONE-PAGE SNAPSHOT

WHAT PAGE ONE ACTUALLY TELLS YOU

Asking price$1,250,000
Total sales$2,790,000
Owner's cash flow$454,101
Price / cash flow2.75x

How it works

HOW OWNER'S CASH FLOW IS BUILT

1
START AT NET PROFITThe number the tax return actually shows
2
ADD BACK DEPRECIATIONA paper expense, no cash left the business
3
ADD OWNER PAY AND BURDEN$156,000 salary plus the payroll taxes on it
4
ADD PERSONAL PERKSAuto, travel and entertainment run through

FINANCIAL FEASIBILITY

WHAT'S LEFT AFTER THE BANK AND YOU

Owner's cash flow$454,101
Loan payments (est.)-$182,000
Your salary-$120,000
Cushion leftabout $152,000

Key points

PROVE EVERY LINE BEFORE YOU BELIEVE SDE

Depreciation
Owner salary
Payroll burden
Travel and meals
Auto expense
One-time legal fees

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Buying a Business

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