No SBA Loan and $75k Out of Pocket

We didn't talk about multiples when I made my offer. We just talked dollar value. And I think a lot of times sellers have a certain dollar value in mind.

And so I could sense that and so I threw out a number. We also had a really long negotiations process and I think my deal structure is probably, probably the reason behind that. So I paid $75,000 out of pocket and the rest of it was seller equity rollover and a seller note.

So no SBA loan.

No SBA loan, yeah. And I just, like I said, I wanted the seller to be. Be. I wanted the seller to have something tied to the business still there were certain risks with the business that I couldn't mitigate or I couldn't diligence. Let's say I could mitigate, I couldn't like eliminate.

Comfortable. Yeah, I couldn't eliminate them. So like regulatory risk is one example that actually has proven to be a real risk because the short term rental regulations in our area are quite strict and they're trying to get stricter.

Yeah.

So that's an example of something, you know, the, the seller motivation, customer risk. So one thing I, I liked the customer mix and I like to the customer tenure. You know, some because of the age of the company.

We have, we have clients, property owners who have been with guest houses for 15 years. So I really liked that. And then the mix, you know, the top three customers each have less, a little less than 10%, make up a little less than 10% of revenue.

But then all of the other customers, there's a long tail, make up, you know, less than a percent, sometimes a couple percentage points. And so I liked that. But in our industry, the way that our contracts work is I would say like medium retention.

I mean customers have medium switching costs. But sometimes people sell a property. And so there's kind of this natural churn that happens in this industry, which it was fine, it was nothing that this company guest houses had good retention for the industry.

But, but there was this natural churn in the industry that wasn't super comforting. And so certain things like that I was able to get comfortable with because of the deal structure.