Few buyers pay all cash at this size. Deals are assembled from pieces, and how you assemble them affects your risk far more than the headline number does.
The common pieces
- Seller financing: the seller is paid over time out of the business. Extremely common, and a seller who refuses any of it is telling you something.
- Bank or government-backed lending: in the US that often means an SBA loan; other countries have their own equivalents, with their own rules and timelines.
- Earnout: part of the price paid only if the business hits agreed numbers after close.
- Your own cash, which is usually the smallest piece and the most expensive to you.
Seller financing does double duty: it lowers the cash you need and it keeps the seller invested in a smooth handover. An earnout does something similar for a business whose future you and the seller disagree about — it lets you pay the seller’s price only if the seller’s forecast turns out to be right.
Whatever the structure, model the debt service against the worst three months in the last three years, not the average. Acquisitions rarely fail because the price was slightly high; they fail because the payments are due in a quarter when revenue dipped.
Try it
Build a simple monthly model: earnings, minus your salary, minus debt payments, in a bad quarter. If that number is negative, restructure the deal rather than hoping for a good year.