How Alicia Powers structured a $250k SDE acquisition around risk
Alicia Powers bought a 32-year-old general contractor for $750,000 at a 3x SDE multiple, with 80% as a seller note that did not come due for 18 months. This case study breaks down how a first-time buyer deferred the financial stress so the business could pay for itself before payments started.
Short answer: how did she structure around the risk?
Alicia structured the deal so payments came due after the business had time to generate cash flow. The seller note was 80% of the price at 4% over five years, starting 18 months after close. The down payment was split, with most deferred six months. The seller also mentored her unpaid for 18 months.
What was the business and the deal?
She bought a design-build residential general contractor in San Diego that specialized in home additions. SDE means seller's discretionary earnings, the cash a single owner-operator takes out of a business. Here are the core numbers.
- Revenue: $1.6 to $2 million per year over the prior three years.
- SDE margin: roughly 10 to 13 percent of revenue.
- Most recent SDE: $250,000.
- Purchase price: $750,000, a 3x multiple of recent SDE.
- Operating history: 32 years in business.
A 3x SDE multiple is standard for a residential general contractor of this size. The seller was in his seventies and wanted a succession plan, not a quick exit.
Who came with the business?
The company had one owner, a superintendent who had worked there since 1993, a small admin team, and typically one to three in-house crews. The superintendent was also planning to retire within a few years, which is a key person dependency a buyer has to weigh.
Why buy instead of starting a contractor from scratch?
Because the price bought 32 years of assets that a startup cannot replicate quickly. Alicia ran the numbers on building her own general contractor and decided acquisition was the stronger path, even at $750,000. The intangible value was the real prize.
- Operating history: 32 years of track record and claims data.
- Low license number: signals long experience in California's contractor licensing system.
- Subcontractor network: 30 to 40 relationships built over decades.
- Better terms: preferential payment and bidding terms with those subs.
- Past performance: documentation that can support future government contract bids.
- Insurance benefit: lower cost from 32 years of claims history.
Alicia already held her own general contractor's license, so she could legally run the company on day one.
What did due diligence cover?
Her due diligence was pragmatic. She reviewed three years of profit and loss statements because construction revenue is cyclical and project-based, so a single year can mislead. She wanted to see the swings, not a smooth average.
The first round of due diligence also included a legal review and a letter of intent (LOI) with standard asset sale terms, working capital provisions, and earnouts. She modeled what the business was worth if the seller kept the work in progress, which became the sticking point.
Why did the first deal fall apart?
The first deal collapsed because the seller refused to give up the work in progress, and the math stopped working without it. This was not a negotiating tactic. It was a moral stand. He had promised customers he would finish their projects, and no acquisition term changed that promise in his mind.
In practice, he wanted two bank accounts and two separate operations until his existing jobs were complete. With the SDE tied up in that work in progress, Alicia could not make the numbers work, so she walked away.
How did the second deal come together?
Eight months later, Alicia earned her physical general contractor's license and texted the seller a photo of it. He replied, "Why don't you come by the office and we can talk." He arrived with a restructured proposal that traded cash terms for time.
| Term | First attempt | Second attempt |
|---|---|---|
| Work in progress | Seller would not cede it | Seller still kept it |
| Purchase price | $750,000 | $750,000 (unchanged) |
| Down payment | Standard at close | Split, most deferred 6 months |
| Seller note | 80% of price | 80%, due 18 months after close |
| Seller involvement | Not specified | 18 months mentoring, unpaid |
The most surprising part: the price stayed the same. The seller added more than $200,000 in unpaid mentoring into a deal that already favored Alicia. He was not trying to extract more money. He was trying to make sure she could succeed.
What is the one takeaway for first-time buyers?
The structure flipped the usual risk profile. Most first-time buyers with limited capital take on heavy financial stress on day one. Alicia deferred that stress, giving the business room to produce cash flow before payments started.
Here is the full structure that made it survivable:
- Seller note: 4% interest over five years, starting 18 months after close.
- Split down payment: 80% of it deferred until six months after close.
- Unpaid mentoring: the seller worked alongside her for 18 months at no fee.
- Outside income: her husband's corporate salary and health insurance meant the family needed no distributions early on.
But the structure was a symptom, not the cause. What made it possible was trust built over four years. Alicia had hired this contractor for two accessory dwelling unit (ADU) projects at her own homes before she ever asked to buy the business. She knew his work and his character, and she simply called and asked if he would sell. He said yes.
When the first deal fell apart, he did not move on to another buyer. He sat with it and called her back. Her biggest risk was never the small size, the project-based revenue, or the retiring superintendent. It was whether she and the seller could co-operate the same business for 18 months. History answered that question. For a contrasting view on owner dependency, see how another buyer approached buying small to build long term.
What to check in the Google review history before buying
Deal structure protects you from financial risk, but it does not tell you whether the customer base is slipping. One signal buyers consistently overlook is the review history trend. Not just the current star rating, but whether complaint volume has been accelerating in the months before the listing went live.
A business rated 4.2 stars two years ago and now at 3.8 stars with rising complaints is a different asset than one sitting steady at 3.8. A short reputation audit before you sign can surface that trend before it becomes your problem.
Frequently Asked Questions
Is 3x SDE a fair multiple for a residential general contractor?
Yes, 3x SDE is standard for a residential general contractor of this size. Alicia paid $750,000 for a business with $250,000 in recent SDE, which lands squarely at a 3x multiple. The intangible value, including 32 years of subcontractor relationships and licensing history, supported that price.
What is a seller note and why does it lower buyer risk?
A seller note is financing the seller provides instead of full cash at close. Alicia's note covered 80% of the price at 4% over five years and did not come due for 18 months. That delay let the business generate cash flow before payments began, which deferred her financial stress.
What is work in progress in a business sale?
Work in progress is the revenue and expenses tied to jobs already started but not finished. In this deal, the seller refused to hand over his active projects because he had promised customers he would complete them. That stance ended the first negotiation, since the SDE was embedded in that unfinished work.
Why did the seller mentor the buyer for free?
The seller wanted Alicia to succeed, not to squeeze more money from the deal. He kept the price at $750,000 and added more than $200,000 of unpaid mentoring on top, working alongside her for 18 months. The relationship, built over four years of prior ADU projects, made that goodwill possible.
What due diligence matters most for a project-based business?
Review at least three years of profit and loss statements, because construction revenue swings with the project cycle and one year can mislead. Beyond the financials, weigh owner dependency, key staff like a retiring superintendent, and the review trend that signals customer health.
Verdict
Alicia Powers turned a $250,000 SDE business into a survivable acquisition by deferring almost every payment and relying on a seller who cared about her success. The numbers were standard at a 3x multiple, but the structure and the trust behind it were not. For buyers studying creative financing, also read how one searcher handled SBA loan and licensing challenges and how another bought $1.5M of earnings without an SBA loan.
Before you sign anything, look past the financials at the customer trend. A business with accelerating complaints is a different asset than one holding steady, even at the same star rating. Run a Reputation Audit at velaworks.io before you commit.