Transcript
Memo Part 4 of 6. Pricing the SBA Rules and Red Flags. Pricing. 05 Pricing Norms. 2025-2026. Use SDE below $2 million and EBITDA above it. SDE is net profit plus one owner's salary and benefits, personal and discretionary items, one-offs, interest, taxes, and depreciation. It assumes the buyer works in the business for free beyond the SDE. EBITDA removes owner comp entirely and assumes a paid manager is already in the cost base.
Comparing a 2.8 times SDE listing to a 5 times EBITDA comp is the single most common first buyer pricing error. Median multiples by deal size, IBBA slash M&A source market pulse, Q1 2025, and Q2 2026. Under $500,000, 2.0 times SDE. $500,000 to $1 million, 2.8 times SDE. $1 million to $2 million, 3.0 to 3.1 times SDE. $2 million to $5 million, roughly 3.5 to 4.8 times EBITDA. $5 million to $50 million, 4.5 to 5.8 times EBITDA. Deal sold at 94% of asking in 2025. Digital cross check.
Empire flippers typical listing at 2.3 times annual net profit sits below Main Street SDE medians. Correctly, because digital net profit usually excludes any owner's salary replacement and carries platform and traffic risk. Do not import Main Street multiples into SAS or content deals or the other way around. SBA 06, SBA 7A, the 2026 rules that matter. Most 2025 vintage SBA guide content predates the current rules and understates the bar.
Financing structure gets its own dedicated work stream, but these are the rules the thesis and buy box are built on. Loan basics, max loan $5 million per 7A loan, 10-year term for a business acquisition without real estate. Up to 25 years blended when real estate is included. Variable rate capped at Prime plus 3% for loans over 350K. Reflect, older guides say Prime plus 2.75%. Expred caps were revised, so confirm with the lender.