What a buyable SMB actually looks like (numbers inside)

Been digging into a Tucson deal that's listed as a carpet cleaning company. Honestly almost skipped it until I looked closer.

The numbers: $1.9M trailing revenue, $323k SDE, $449k asking price. That's roughly 1.4x SDE – which should immediately tell you something's off.

What's actually happening here:

This isn't really a carpet cleaning business. I mean technically it is, but that's just one side. They're running:

1. Carpet and tile cleaning – the low-margin recurring stuff that brings customers in
2. Water/fire/mold restoration – the high-margin insurance work with way better unit economics

Most restoration outfits only handle mitigation (emergency response, drying everything out). This one's different because they hold a KB-2 general contractor license. That means they can do the full rebuild, not just the demo and dry-out. They're getting paid for the entire claim.

That licensing detail completely changes the valuation framework.

Why this is trading so cheap:

My guess is it's a combo of things – the broker categorized it wrong (specialty cleaning instead of construction/restoration), they don't seem to understand the competitive moat from the license, and there's probably some ownership transition complexity creating urgency.

Bottom line: it's priced like a janitorial service (1.5-2x multiple) when it should probably be valued closer to a restoration business (3x+ range).

Due diligence focus areas:

The qualifying party on that KB-2 is critical – you need to structure this right or the license advantage disappears. Also gotta check equipment age since restoration companies can have a lot of hidden capex in aging trucks and gear. Financing wise, the DSCR looks really strong even with conservative SBA assumptions.

Main takeaway: some of the best SMB deals are mispriced because of category issues or licensing complexity – not because the actual business is weak. Those tend to be where the alpha is.