Illustrative composite. Hypothetical illustration. This is not a completed transaction, client case, appraisal, lender approval or market comparable. Both sites, the assumed regional buyer, financials, price factors, contracts, and taxes are chosen scenario inputs.
What does the two-location snapshot assume?
Start with the valuation hub for the wider earnings framework. This example combines two assumed plumbing locations sold together rather than separating one branch.
Assume a twelve-month period ending September 30, 2026. Site A revenue is $4,000,000 and Site B revenue is $2,800,000, producing $6,800,000 combined revenue.
The site results below are before unallocated central expenses. Current branch payroll and ordinary local operating expenses are already included; they are not removed merely because the buyer has other locations.
| Snapshot input | Assumed amount | Accounting boundary |
|---|---|---|
| Site A result | $540,000 | Before specified shared expenses |
| Site B result | $360,000 | Same basis and period |
| Unallocated central expenses | $210,000 | Not included in the site results |
| Owner compensation | $160,000 | Included within central expenses |
| Supported nonrecurring cost | $30,000 | Included in consolidated books |
| Recurring replacement duties | $205,000 | Needed after the owner leaves |
The buyer is described as regional for this scenario. No real company, capital commitment, acquisition appetite, or proposed offer is represented.
How does the site bridge reconcile to the books?
Combine $540,000 and $360,000 to reach $900,000 before unallocated central costs. Deduct $210,000 once, producing $690,000 consolidated book EBITDA.
The shared expenses include the stated owner pay plus other central functions. Adding a separate $160,000 payroll deduction at this stage would charge owner pay twice.
| Consolidation step | Hypothetical result | Required check |
|---|---|---|
| Site results combined | $900,000 | Consistent period and perimeter |
| Unallocated central expenses deducted | −$210,000 | Not already included |
| Consolidated book EBITDA | $690,000 | Matches the assumed ledger |
| Intercompany sales in this illustration | $0 | No invented outside revenue |
| Reconciliation difference | $0 | Explicit model result |
The IRS recordkeeping publication supports maintaining records and supporting expenses. It does not prescribe this buyer’s allocation method or approve the adjustments.
In a real review, reconcile the site schedules to the general ledger and financial statements. Identify charges assigned to both sites, costs left centrally, and any intercompany activity.
A different allocation may change a site’s reported result while leaving the combined business unchanged. Do not describe that presentation change as new earnings.
How does normalization preserve necessary central functions?
Start from $690,000 book EBITDA. Add $160,000 owner pay and $30,000 assumed nonrecurring cost, then deduct $205,000 recurring replacement duties.
The math is $690,000 + $160,000 + $30,000 − $205,000 = $675,000 normalized earnings.
This is equivalent to starting from the two before-shared-cost site results and retaining the same central-cost treatment. Use one bridge, not two cumulative adjustment sets.
The add-back guide connects each adjustment to recurrence and evidence. Necessary dispatch, accounting, insurance, and management costs remain in the model.
The $205,000 budget covers defined incremental duties after the owner exits. It does not duplicate current branch managers already included in site expenses.
Use the quality-of-earnings guide to investigate the real records. A polished consolidated table cannot prove that both locations share the same accounting basis.
What price range follows from the stated assumptions?
Choose factors of 3.1, 3.6, and 4.1 for math only. They are not observed regional-buyer multiples, market comparables, recommended offers, or appraisal conclusions.
| Arbitrary factor | Defined normalized earnings | Illustrative business price |
|---|---|---|
| 3.1 | $675,000 | $2,092,500 |
| 3.6 | $675,000 | $2,430,000 |
| 4.1 | $675,000 | $2,767,500 |
The chosen midpoint is $2,430,000 for both locations together, assumed debt-free and cash-free with defined operating working capital. No owned real estate is included.
The scenario does not apply one factor to each site and then add a separate combined-company premium. That would require its own basis rather than being an automatic consolidation step.
A claimed $40,000 annual buyer saving remains a separate assumed sensitivity. It has not been verified, agreed, or included in the $675,000 historical normalized result.
The buyer may already run some central functions. Check migration costs, retained staff, contracts and needed coverage before claiming savings. Those costs can offset apparent overlap. A strategic label cannot settle them. Keep any proposed benefit separate from the seller's supported historical earnings.
How does the structure translate into seller proceeds?
Assume $2,030,000 gross closing cash, $250,000 seller-note principal, and $150,000 held funds. These total the $2,430,000 midpoint business price.
Assume seller debt of $420,000, transaction expenses of $110,000, and a $390,000 tax placeholder. The allowance is clearly chosen rather than calculated from a real asset allocation or taxpayer.
| Seller component | Hypothetical amount | Timing or basis |
|---|---|---|
| Business price | $2,430,000 | Both locations together |
| Seller note | −$250,000 | Deferred principal |
| Held funds | −$150,000 | Excluded from immediate cash |
| Gross closing cash | $2,030,000 | Before seller deductions |
| Seller debt payoff | −$420,000 | Counted once |
| Transaction expenses | −$110,000 | Assumed estimate |
| Tax placeholder | −$390,000 | Assumed allowance |
| Immediate modeled net cash | $1,110,000 | Conditional arithmetic result |
The immediate result is $2,030,000 − $420,000 − $110,000 − $390,000 = $1,110,000. Future note payments and held-fund releases are separate and uncertain.
The working-capital guide helps define delivered balances. Do not deduct a site liability in both the working-capital adjustment and seller debt without reconciling the documents.
Obtain a deal-specific tax estimate. Entity type, basis, allocation, real fees, and payment terms can change the seller’s result.
Which location gates remain independently unresolved?
Assume both sites operate in California under the seller’s current entity. The buyer’s proposed acquiring entity and transaction form still need review.
California’s entity-change guidance explains the general new-license requirement and specified exceptions. Two operating locations do not alone prove an exception.
| Location or shared gate | Chosen scenario status | Next evidence question |
|---|---|---|
| Site A lease | Assignment under review | What consent and effective evidence are required? |
| Site B lease | Landlord response pending | Can the proposed rights be documented? |
| Shared contractor authority | Unresolved | Which entity-change rules and exceptions apply? |
| Local permits at each site | Separate review | Which actual authorities govern existing work? |
| System administrator access | Acceptance pending | Who can authorize and test the transfer? |
State registration is a separate inquiry. The SBA registration guidance discusses entity registration and foreign qualification without providing a plumbing license.
If the regional buyer later expands into Georgia, its conditions are different. Georgia’s 2026 law supplies updated scope and active-connection terms; it does not authorize the California acquisition.
Confirm relevant rules, relationships, exceptions, and implementation with the real authorities. A lease consent cannot replace contractor authority or a local permit.
How should the buyer handle systems and the transition?
Use an aggregate asset and access map before transferring real information. Identify dispatch, payroll, accounting, phones, email, customer systems, and responsible administrators.
NIST’s small-business guidance supports governance and awareness of assets and access. It is voluntary. Following the guide cannot certify a secure migration. Test actual permissions and operating access before accepting the handoff, with the authorized owner and recipient identified.
The first-90-days guide covers the wider handoff. This example’s immediate task is to verify each location’s accepted rights and essential operating access.
A staged transition can preserve evidence and accountability. It does not justify granting access before the real rights, security, and transaction conditions support it.
What is the transferable lesson from the combined sale?
Two site statements can overstate or understate the business when shared costs are missing or duplicated. The useful starting point is one reconciled consolidated result.
Then work through the acquisition in this order:
- Confirm consistent site periods and accounting definitions.
- Reconcile shared allocations and intercompany activity to the books.
- Normalize necessary owner duties once and keep buyer savings separate.
- State pricing assumptions and reconcile the entire consideration.
- Verify authority, lease, contract, and access gates for each site.
- Recalculate seller cash using actual debt, expenses, and tax estimates.
In this composite, the normalized result is $675,000 and immediate modeled seller cash is $1,110,000. Neither number supplies the missing approvals.
A combined sale can proceed only through a real documented arrangement. Keep open site dependencies visible when updating the price, operating plan, and proposed closing.