How To Do Accurate Business Valuations & Creative Deal Structures (Real $2M Case Study)

Ever stared at a business listing and wondered, "What's this thing REALLY worth?"

You're not alone. For most, business valuations feel like some dark art reserved for Wall Street wizards…

But Carl Allen of Dealmaker Wealth Society recently recorded a whiteboard presentation that walks through his valuation framework on a real engineering business, and it will simplify how you think about deal math.

Today, we're breaking down the exact process Carl has used to evaluate hundreds of deals:

The $2M Business That's Actually a $1M Deal

In Carl’s case study analysis, he shares the numbers behind the engineering business:

• Annual Revenue: $2 million

• Operating Margin: 20%

• EBITDA: $400,000

By default, most would multiply that $400k by 3 and declare it worth $1.2 million...

But as Carl points out, that's precisely the mistake that keeps rookie buyers overpaying while experienced acquirers get better deals.

Carl's 3-step analysis shows this business is worth exactly $1 million, and he proves it with math — not guesswork ⬇️

Step 1: Find the REAL Profit Numbers

That $400,000 EBITDA? Carl calls this the "tax number" - it's fiction until you adjust it for your reality as the new owner.

He calls this "recasting" (or "pro forma" from his Wall Street days), and it's the difference between overpaying and stealing a great business.

Carl's Add-backs (profits that increase): The current owner takes a $200,000 salary, but a competent GM costs only $100,000. That's $100,000 more profit for you.

Carl's Take-backs (profits that decrease): The owner keeps the building and will charge $50,000 annual rent not currently in the P&L. That's $50,000 less profit for you.

Adjusted EBITDA: $400,000 + $100,000 - $50,000 = $450,000

So, your actual earning power is about 13% higher than the headline number.

Step 2: Calculate What You're Really Buying

Carl's framework distinguishes between Enterprise Value and Equity Value. This is a critical distinction most buyers miss.

Enterprise Value (the business value) is straightforward: $450,000 × 3 (market multiple for engineering businesses) = $1,350,000

But here's what Carl emphasizes:

You're not buying just the business... You're buying the equity after accounting for:

1. Surplus Cash (cash beyond the $200k needed to run the business): +$200,000

2. Inherited Liabilities (existing debt you'll assume): -$550,000

3. Real Estate (not included in this deal): $0

Actual Purchase Price: $1,350,000 + $200,000 - $550,000 = $1,000,000

Carl's house-buying analogy makes this crystal clear: Enterprise Value is like the asking price, but Equity Value (what you actually pay) accounts for the existing mortgage.

Step 3: Structure the Deal So the Business Buys Itself

Here's where Carl's approach becomes even more brilliant. With $450,000 in annual cash flow, he structures this deal to require minimal upfront capital:

• Closing Payment: $200,000 (using the surplus cash already in the business!)

• Seller Financing: $800,000 over 4 years at 10% interest

• Annual Seller Payment: $220,000 (principal + interest)

Carl's golden rule? You need at least 1.5x debt service coverage. This deal delivers 2.04x - meaning the business generates twice what you need for payments.

The Hidden Financing Opportunity Carl Exposes

While others are desperately trying to raise $1 million in cash, Carl's framework shows how the business itself provides the funding:

• That $200,000 "down payment"? It's sitting in the business's bank account

• The $550,000 in liabilities? Already factored into the seller's price

• The remaining $800,000? Paid from future cash flows

Total cash needed from you at closing: Potentially zero.

Carl's systematic approach to valuation and structuring changes how we look at deals. What used to feel like complex financial engineering can now follow a clear, repeatable process.

The businesses that look "too expensive" at first glance often become the best acquisitions once properly structured using Carl's methodology.

Here’s 3 critical lessons from Carl's analysis:

1. Don’t trust the initally stated EBITDA - always recast for your ownership scenario

2. Understand that Enterprise & Equity Value are not the same thing

3. Structure for cash flow coverage - If you can't hit 1.5x minimum, walk away

So, next time you evaluate a business, run it through Carl's framework. His approach to deal structuring has helped countless acquisition entrepreneurs (including us) see opportunities where others see obstacles.

Thanks for reading Acquiring & Exiting.

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