It is important to acknowledge that nothing is normal. Every transaction has it own issues. The mission is to consider which alternative method will allow the seller to get the best price possible and close the transaction.

One real-life example is a business with a $1 million owner benefit (seller discretionary cash flow or SDCF) that has been in business for over 20 years, with good accounting records, steady growth, no customer concentration, no employees to speak of and no accounts receivable. All transactions are settled when the inventory is sold by wire transfer. Normally this would be a sweetheart opportunity, and highly marketable. A reasonable asking price for this business would be somewhere in the range of X3.3 multiple of the owner benefit and it most likely would sell at X3 to X3.1.

The issue is that there is approximately $2.3 million in high unit value inventory that turns every three to four weeks. If you add this to the price of the business, the multiple of earnings becomes unworkable. Normally, inventory is considered to be part of the business, because it is needed to operate the business; no argument.

The transaction was structured to handle the inventory like a leased piece of equipment, considering it a rental and leaving the lease payment in as an operating expense so the SDCF is calculated after this payment has been made. At the closing of the transaction, the equipment lease is assumed/assigned.

The inventory was handled in a similar manner: paid for using a credit line called a floor plan, which a buyer will have to qualify for and “assume or be assigned” at closing. Since the inventory is never titled to the company, but rather the title is held by the floor plan funding source, which controls the title, and paid as the inventory is sold off each week.  The interest expense to cover the rolling inventory is left in as an operating expense. The funding source controls the selling of the inventory and has it insured. As a consequence, it has almost zero risk on the lender’s side.

Without this structure, the seller would never have been about to sell the business. This is just one example of where experience makes the difference.

Whether you’re a seller or a buyer, if you would like a confidential conversation about how to prepare, contact me on my cell, 954-579-4687, or by e-mail at For information, Google Robert M. Dolan and Dolan Sales, Inc. and see my LinkedIn profile at