Financing Structure
Senior loan 80% · $844,000 @ 10.0% / 10yr → $133,842/yr
Seller note 10% · $105,500 @ 5.0% / 3yr → $37,943/yr
Equity 10% · $105,500
Total annual debt service $171,785
What the business does
A Santa Rosa, CA-based electrical contracting firm (founded 2011) specializing in power plant, industrial, and commercial electrical construction and maintenance across California and the Pacific Northwest.
3-Year Profit Trend
Discretionary Earnings by Year
2024: $384,0781
2025: $196,5412
2026 (Claimed Run-Rate): $600,000
Using the claimed 2026 run-rate of $600,000 alongside the earnings from 2024 and 2025, the average discretionary earnings over those three periods is $393,539.67 that we can put a multiple of around 3x on that.
Multiplying the average discretionary earnings of $393,539.67 by 3x yields: $1,180,000, we think this is a fairly realistic estimate of the valuation in this case, IF they hit that run-rate. For that reason we recommend a seller note that will sit in the escrow later.
There's a caveat to US hiring a FULL time operator here alongside Deepak, which will most likely reduce the $600k run rate to $475k in that market.
• Average: $351,873.10
• Result (×3) on this value: $1,055,619.30
The third question here is how we will close this? It's a fairly small deal which will need to most likely go through a SBA 7a loan or a cash deal.
The modelling assumes a 80 % SBA 7a loan with a PG signed, 10% seller note for 3 years at 5% interest rate, and 10% equity injection, now that is not really as aligned with Deepak.
That 80% needs to be raised through a different debt mechanism with no PGs or a creative deal like
$250k down an $805k over the next 3 years of this deal for a 5% interest rate, no SBA, fast closing.
Top Risks
ADD-BACKS needs to be verified through their add-backs schedule line by line from 2023 to 2026 up to date (October month 2026 as well) with an accoutnant, we can also verify it ourselves in-house and tell which is defensible and not. We can then let our lenders to analyze these addbacks.
- - Owner works 60-70 hrs/week with no full-time project manager/estimator in place — high key-person dependency during transition. This is a huge problem for Deepak based on his buyer profile. We immediately need to leverage the owner to hire somebody, that needs to be part of the LOI/APA later to get Deepak to become a strategic manager & investor not replicate what the current owner does. This will probably drop the SDE in 2026 by 125k + some revenue/profit share to keep them incentivised.
- - Two of the last three full fiscal years (2024, 2025) show NET LOSSES on the P&L — confirm true normalized cash flow before offering
- - Heavy revenue concentration: top 3 customers = ~80% of sales (Nordby 30%, Calpine 25%, Echo Power 25%) — losing one is existential
- - Broker's "discretionary earnings" and asking-price multiple rely heavily on a single Q1 2026 run-rate annualization, not proven full-year results
- - AR aging shows ~$74,865 over 91 days past due and AP includes a $5,200 90+ day balance — collections/vendor relations need review
Owner Involvement
Owner works 60-70 hrs/week handling estimating, bidding, QC and client relationships; no project manager/estimator yet — seller willing to stay on temporarily to transition.
Value Reasoning
Asking $1,375,000 against a 3-yr average SDE of just $47,814 (heavily dragged by 2024-2025 losses) implies an unsupportable multiple on trailing GAAP net income.
Broker instead anchors to a recast/addback "Discretionary Earnings" figure (~$196K-$384K/yr per recast sheet) and a Q1 2026 annualized run-rate (~$650K) — buyer must independently verify which figure is real and sustainable.
On the recast 3-yr DE average (~$431K), ~3.2x is plausible for an electrical contractor, but on raw tax-return net income the price looks rich — get a QoE before committing.
Questions for the Broker — What Each One Means
1. Can you provide full detail reconciling the "Recast Sheet" discretionary earnings addbacks (e.g. $138K owner salary 2025, $293K leasehold improvements 2024) to the actual tax returns line-by-line?
2. What drove the 2024 net loss of -$144K and the 2025 net loss of -$75K — were these truly one-time (leasehold improvements, legal/professional spikes) or recurring?
3. Is the Q1/Q2 2026 rebound ($312K net income through June) driven by any one-time large jobs (e.g. the $740K VA Clinic Martinez job) that won't repeat?
4. What are the terms and remaining length of the top 3 customer relationships (Nordby, Calpine, Echo Power) — any contracts, or purely relationship-based/at-will?
5. What's included vs excluded in the sale — confirm the 2018 Volvo XC90 and 2024 Tesla Model Y are explicitly excluded per the vehicle list, and clarify real estate/lease terms for 3471 Regional Pkwy.
6. Why is $100K of estimated working capital needed in addition to the purchase price, and does the deal structure include any seller financing or earnout tied to 2026 actual performance?
Post-Acquisition Hiring
- Full-time Project Manager/Estimator — est. $90,000-$110,000/yr (critical to reduce owner's 60-70 hr/week load and support 20-30% growth per CIM)
- Sales/Business Development support (part-time or outsourced marketing) — est. $40,000-$60,000/yr to reduce reliance on word-of-mouth
Next Steps
1. Request a full Quality of Earnings (QoE) review reconciling the broker's "Recast Sheet" discretionary earnings to the actual tax returns and bank statements for 2023-2025 plus YTD 2026.
2. Ask the broker directly about the 2024/2025 net losses and whether the 2026 rebound is sustainable or driven by a few large one-time jobs (e.g., $740K VA Clinic Martinez).
3. Interview the owner about the top-3 customer relationships (Nordby, Calpine, Echo Power = ~80% of revenue) — get a sense of contract terms, tenure, and risk of loss.
4. Verify AR/AP aging in detail — $74,865 in AR over 91 days needs collection-risk assessment before closing.
5. Structure an initial offer well below asking, anchored to a blended/normalized SDE (3-yr average of true net income plus conservatively-vetted addbacks, likely $150K-$250K range) rather than the broker's optimistic recast — propose ~2.5-3x normalized SDE with an earnout tied to 2026 actual performance to bridge the valuation gap.
6. Confirm post-sale facility/lease terms (3471 Regional Pkwy) and excluded assets (2018 Volvo XC90, 2024 Tesla Model Y) in the asset purchase agreement.
Why It Fits This Buyer
⚠ Reviewer marked GO although the most recent year was negative (-75565). A standout platform opportunity — a 20+ year reputation in the lucrative power-generation/industrial electrical niche with a proven 2026 rebound, ready for a buyer to inject management depth and unlock scalable growth.