Understanding Your Financial Dashboard

Once you've imported a deal, AlphaY calculates dozens of financial metrics automatically. Here's what those numbers mean and why they matter for your acquisition decision.

Access Your Financial Analysis

1. Go to Listings and click on any deal
2. Navigate to the Financial Analysis tab
3. All calculations update automatically when you change deal details

Key Metrics Explained

Valuation Multiples

Revenue Multiple

• Asking Price ÷ Annual Revenue
• Industry benchmark: 0.5x - 2x for most small businesses
• Higher multiples may indicate premium business or overpricing

SDE Multiple

• Asking Price ÷ SDE (Seller's Discretionary Earnings)
• Industry benchmark: 2x - 4x for most small businesses
• This is the most important metric - shows payback period

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Cash Flow Analysis

SDE (Seller's Discretionary Earnings)

• Net income + owner salary + owner benefits + interest + taxes + depreciation
• This is the cash available to you as the new owner
• Key number for determining if you can afford the business

Adjusted Cash Flow

• SDE minus your planned salary
• Shows actual investment return after paying yourself
• Must be positive to service debt and provide ROI

Investment Returns

Cash-on-Cash Return

• Annual cash flow ÷ your cash investment
• Shows return on your actual money invested
• Target: 15-25% for small business acquisitions

ROI (Return on Investment)

• Includes your salary and cash flow
• Compares total benefit to total investment
• Target: 20-30% for small business acquisitions

Debt Coverage

Debt Service Coverage Ratio (DSCR)

• Cash flow ÷ annual loan payments
• Banks typically require 1.25x minimum
• Higher ratios indicate safer financing

Adjusted Debt Service Coverage Ratio (DSCR adj)

• (Cash flow - Buyer Salary - Load Fees - Diligence Costs) ÷ annual loan payments
• Banks typically only look at DSCR this is for you to better understand if the loans serviceable and what margin protection you have after your goals and costs.
• Higher ratios indicate safer financing

Red Flags to Watch

Valuation Concerns

• SDE multiple above 4x (unless exceptional business)
• Revenue multiple above 2x without strong growth
• Negative cash flow after your salary

Financing Risks

• DSCR below 1.25x
• Down payment exceeding your available cash
• Total investment over 80% of business value

Green Flags

Strong Opportunities

• SDE multiple 2-3x with stable earnings
• DSCR above 1.5x
• Cash-on-cash return above 20%
• Growing revenue trend

Understanding Industry Benchmarks

Different industries have different normal ranges:

Service Businesses: Higher multiples (3-4x SDE) due to predictable revenue Manufacturing: Lower multiples (2-3x SDE) due to equipment dependencies
Retail: Varies widely (1.5-4x SDE) based on location and competition Technology: Higher multiples (3-10x SDE) for recurring revenue models

Using the Analysis

Compare Deals

• Sort by SDE multiple to find best values
• Filter by DSCR to ensure financing feasibility
• Compare cash-on-cash returns across opportunities

Negotiation Power

• High multiples give you leverage to negotiate down
• Point to industry benchmarks in your offers
• Use due diligence findings to justify price adjustments

Pro Tips

1. Focus on SDE Multiple - Most important single metric
2. Verify the Numbers - Always confirm seller's financial claims
3. Consider Your Total Investment - Include due diligence, working capital, and opportunity costs
4. Look for Trends - Growing SDE is worth higher multiples

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