Five-year model: what the deal leaves you after the loan is paid
EXAMPLE · SAMPLE DEAL, NOT REAL DATA
On the stated SDE
$1.51M
Cumulative cash by Year 5 · breaks even in Year 1
On the supported SDE
$964k
Cumulative cash by Year 5 · breaks even in Year 2
Rests on the seller's word
$543k
Stated minus supported, by Year 5
$543k of the five-year cash on the stated number rests on the seller's word — the supported number leaves $964k, not $1.51M.
Run the same five-year projection the Verity app runs — financing, growth, exit — on the SDE the listing states and on the SDE the documents support, side by side. Then see how much of the five-year cash rests on the seller's word.
1 · Start from the listing
EXAMPLE · SAMPLE DEAL, NOT REAL DATA
Supported = on a tax return or P&L. Claimed = the listing's number only. Missing = not shown to you yet.
If yes, its value is added to the purchase price and financed on the same split.
2 · Structure the deal
20%
60%
20% — the remainder
3 · Growth assumptions — these are yours, not the listing's
5%
12%
18%
+5 pts
Year 1 margin starts where each SDE puts it: stated 30.0%, supported 22.0%. The app's own default is 30% → 35%.
5.5×
Years 4 and 5 grow at 10% and 8% in this model. That is fixed in the app too, so the two agree.
4 · What five years leave you — on the stated number, and on the supported number
On the stated SDE
Breaks even in Year 1 and leaves $1.51M of cumulative cash by Year 5, at 3.00× SDE.
Cash in at close
$180k
Annual debt service
$121k
Year 1 net cash
$194k
Break-even
Year 1
Exit value, before loans
$2.94M
Cash-on-cash, gross
23.17×
On the supported SDE
Breaks even in Year 2 and leaves $964k of cumulative cash by Year 5, at 4.09× SDE.
Cash in at close
$180k
Annual debt service
$121k
Year 1 net cash
$110k
Break-even
Year 2
Exit value, before loans
$2.27M
Cash-on-cash, gross
17.15×
FIVE YEARS ON THE STATED SDE
Year
Y0
Y1
Y2
Y3
Y4 exit window
Y5 exit window
Revenue
$1.00M
$1.05M
$1.18M
$1.39M
$1.53M
$1.65M
Profit (EBITDA)
$300k
$315k
$382k
$486k
$534k
$577k
Debt service
$0
($121k)
($121k)
($121k)
($121k)
($121k)
Net cash flow
-$180k
$194k
$261k
$364k
$413k
$456k
Cumulative cash
-$180k
$14k
$274k
$639k
$1.05M
$1.51M
FIVE YEARS ON THE SUPPORTED SDE
Year
Y0
Y1
Y2
Y3
Y4 exit window
Y5 exit window
Revenue
$1.00M
$1.05M
$1.18M
$1.39M
$1.53M
$1.65M
Profit (EBITDA)
$220k
$231k
$288k
$375k
$412k
$445k
Debt service
$0
($121k)
($121k)
($121k)
($121k)
($121k)
Net cash flow
-$180k
$110k
$167k
$253k
$291k
$324k
Cumulative cash
-$180k
-$70k
$96k
$350k
$640k
$964k
$543k of the five-year cash on the stated number rests on the seller's word — the supported number leaves $964k, not $1.51M.
On record
Supported SDE $220k
Asking price $900k — what the seller is asking
Assumed — by you
Annual revenue $1.00M — the listing's number
SDE the listing states $300k — the seller's number
Financing 20% down · 60% SBA at 7.5% over 10y · 20% seller carry at 6% over 5y
Growth 5% / 12% / 18%, then 10% / 8%
Margin change +5 pts by Year 3 · exit at 5.5× Year-4 profit
What this model does, and does not, do
Year 0 profit is the SDE you entered. From Year 1 on, profit is revenue × the margin — it does not subtract a salary for you as the new owner.
Exit value is Year-4 profit × your exit multiple. It is the value of the whole business. It does not subtract what you still owe on the SBA loan and seller note at that point — so "cash-on-cash" is gross, before paying the loans off.
Debt service is a flat annual payment for each loan's term. Break-even is the first year cumulative cash turns positive.
The math is the Verity app's What-If Lab, unchanged. Same inputs, same numbers.
What to ask the seller for
The last three years of tax returns and a current P&L, to support revenue of $1.00M.
Your five-year model, in one paragraph
At $900k with 20% down, 60% SBA and the rest on a seller note, annual debt service is $121k. On the SDE the listing states ($300k) the deal breaks even in Year 1 and leaves $1.51M by Year 5. On the supported SDE ($220k) it breaks even in Year 2 and leaves $964k. Growth, margin and exit multiple are my assumptions, not the listing's. Exit value is before repaying the loans.
Illustrative math on the numbers you enter. Educational, not legal, tax, or financial advice. Nothing you type here is stored.
VERITY · IN-DEPTH ANALYSIS
Run the real thing on the documents
Upload the listing, the returns, and the P&L — every figure traced to its source page, every contradiction surfaced as a question. Reading your documents is always free; the in-depth analysis that surfaces every contradiction is $20 a deal.