Oakbridge Accounting & Advisory

What It Measures

Annual seller’s discretionary earnings allocated across the reported employee count. It measures owner benefit relative to staffing—not what each employee earns or produces individually.

How to Interpret It

Higher is generally favorable when the owner’s workload, staffing hours, service quality and accounting are comparable. $40,000 alone is neither good nor bad: it may be strong for a labor-intensive shop and weak for a high-margin advisory firm. An unpaid full-time owner or excluded contractors can make it look artificially high.

From Weak to Excellent

1. 1Weak / High RiskNegative SDE per employee means the business is losing money on this measure; investigate the underlying earnings.
2. 2Needs InvestigationPositive earnings but below comparable businesses, or falling over time; assess whether staffing and owner pay are sustainable.
3. 3StrongAt or above comparable businesses with consistent staffing and verified earnings.
4. 4Excellent / ResilientSustained improvement above relevant peers, after normalizing owner work and contractor costs, without weakening service.

What It Measures

The share of sales paid as reported owner salary. It excludes distributions and other add-backs.

How to Interpret It

Neither high nor low is automatically better. A low ratio may reflect unpaid owner labor; a high ratio may reflect the owner doing several jobs. Compare with the market cost of replacing those duties.

From Weak to Excellent

1. 1Weak / High RiskUnreported or implausible pay hides the true cost of operations.
2. 2Needs InvestigationPay is disclosed but duties and replacement cost are uncertain.
3. 3StrongPay reasonably matches documented duties and market replacement cost.
4. 4Excellent / ResilientIndependent staffing and pay evidence support earnings after replacing the owner.

What It Measures

The total sales increase or decrease from the earliest to latest year—not an annual growth rate.

How to Interpret It

Higher is generally favorable, but price increases or acquisitions can conceal declining customer demand. Confirm profit and cash collection grew too.

From Weak to Excellent

1. 1Weak / High RiskPersistent contraction without a credible recovery plan.
2. 2Needs InvestigationFlat or erratic sales; inflation may mean real demand declined.
3. 3StrongVerified total growth with stable margins and customer retention.
4. 4Excellent / ResilientSustained profitable growth from diversified, repeatable demand.

What It Measures

Revenue not identified as recurring or contracted. One-time revenue must generally be won again.

How to Interpret It

Lower can improve predictability, but a successful retail business may naturally have mostly transactional sales. Repeat customers are not the same as enforceable contracts.

From Weak to Excellent

1. 1Weak / High RiskOne-time work dominates and the sales pipeline is unsupported.
2. 2Needs InvestigationTransactional sales are viable but fluctuate or depend on the owner.
3. 3StrongRepeatable demand and documented pipeline support future sales.
4. 4Excellent / ResilientDiversified repeat demand remains strong through ownership changes and downturns.

What It Measures

The estimated annual economic benefit to one working owner before acquisition debt. It is not cash available to a passive investor.

How to Interpret It

Higher is favorable only if earnings are repeatable and verified. Subtract replacement labor, financing, capital needs and taxes before deciding what you can actually take home.

From Weak to Excellent

1. 1Weak / High RiskLosses or material unsupported add-backs.
2. 2Needs InvestigationPositive benefit but volatile earnings or incomplete verification.
3. 3StrongRecurring earnings reconcile to tax returns and bank records.
4. 4Excellent / ResilientDurable, growing, independently supported earnings survive owner replacement and stress tests.

What It Measures

The asking price relative to annual owner benefit. It compares purchase cost with earnings, not with revenue.

How to Interpret It

Lower generally reduces valuation risk for equivalent businesses. A low multiple may signal weak earnings or transfer problems; a high one needs stronger growth and quality. The report’s targets are screening criteria, not universal market values.

From Weak to Excellent

1. 1Weak / High RiskAbove the selected ceiling without defensible earnings or comparable sales.
2. 2Needs InvestigationAbove target but potentially supported by quality, growth or better terms.
3. 3StrongWithin target and consistent with relevant closed transactions.
4. 4Excellent / ResilientAttractive relative to comparable sales with independently verified, transferable earnings.

What It Measures

Cash available for debt payments divided by required principal and interest. Here, available cash is SDE less replacement owner or manager salary.

How to Interpret It

Higher means more payment cushion. Below 1.00× cannot cover the included debt from the modeled cash flow. At 1.00× there is no cushion. The selected minimum and strong target govern this report; a lender may calculate DSCR differently.

From Weak to Excellent

1. 1Weak / High RiskBelow 1.00×: cash falls short of included payments.
2. 2Needs InvestigationAt 1.00× or above but below the selected strong target: cushion may be thin; check the selected minimum.
3. 3StrongMeets the selected strong target using supported cash flow.
4. 4Excellent / ResilientRemains above the selected strong target after realistic revenue and expense stress tests.

What It Measures

Required loan principal and interest payments over a year. Principal reduces debt; interest is the borrowing cost.

How to Interpret It

Lower payments help cash flow, but longer terms can increase total interest and a balloon may create refinancing risk. Read the full payment schedule.

From Weak to Excellent

1. 1Weak / High RiskPayments exceed sustainable available cash.
2. 2Needs InvestigationPayments are covered with little reserve or a major balloon risk.
3. 3StrongPayments fit verified cash flow with appropriate reserves.
4. 4Excellent / ResilientPayments stay affordable under stress with manageable maturity and refinancing exposure.

What It Measures

Buyer funds contributed toward the acquisition. The report models a down payment, not the full cash needed to close and operate.

How to Interpret It

More equity lowers leverage but ties up more capital. Less equity increases debt and can exaggerate cash-on-cash return. Loan requirements depend on the program and deal.

From Weak to Excellent

1. 1Weak / High RiskContribution is borrowed or leaves no viable operating reserve.
2. 2Needs InvestigationClosing funds are available but reserves are thin.
3. 3StrongContribution and realistic operating reserves are documented.
4. 4Excellent / ResilientAdequate liquidity remains after closing and under a downside scenario.

What It Measures

Modeled annual residual cash relative to the modeled down payment. It is not a guaranteed yield or total investment return.

How to Interpret It

Higher is attractive only when the cash is sustainable. Heavy borrowing can create a high percentage and high failure risk at the same time.

From Weak to Excellent

1. 1Weak / High RiskNegative cash after modeled obligations.
2. 2Needs InvestigationPositive but below your risk-adjusted target or reliant on thin reserves.
3. 3StrongMeets your target with verified earnings and complete cash requirements.
4. 4Excellent / ResilientExceeds the target and remains attractive after downside testing and necessary reinvestment.

What It Measures

The report’s modeled cash remaining after replacement salary and acquisition debt. It is a screening estimate, not fully adjusted free cash flow.

How to Interpret It

Higher is generally better. A positive number is not automatically distributable cash; ongoing capital spending, working capital and taxes still matter.

From Weak to Excellent

1. 1Weak / High RiskNegative residual cash.
2. 2Needs InvestigationPositive cash but insufficient for necessary reinvestment and reserves.
3. 3StrongCash covers reinvestment, reserves and the buyer’s target.
4. 4Excellent / ResilientDurable surplus remains after realistic downturn and expense scenarios.

What It Measures

The modeled price remaining after disclosed inventory, equipment and included real estate. It approximates intangible value, not an accounting or tax appraisal.

How to Interpret It

Neither high nor low is decisive. High goodwill can be reasonable for a transferable service business but offers less tangible collateral. Missing asset values overstate the residual.

From Weak to Excellent

1. 1Weak / High RiskValue depends on owner relationships that may not transfer.
2. 2Needs InvestigationIntangible value is material but retention evidence is incomplete.
3. 3StrongContracts, brand and customer retention support the allocation.
4. 4Excellent / ResilientIndependent valuation and durable transferable earnings support the intangible premium.

What It Measures

Inventory, furniture, fixtures and equipment that support operations. Book value, replacement cost and resale value are different measures.

How to Interpret It

More assets are not automatically better: obsolete inventory and aging equipment can require cash rather than protect it.

From Weak to Excellent

1. 1Weak / High RiskObsolete, encumbered or missing assets.
2. 2Needs InvestigationUseful assets but uncertain value, condition or ownership.
3. 3StrongInspected, usable assets with supported values and clear title.
4. 4Excellent / ResilientWell-maintained assets fit future needs with independent values and no hidden replacement burden.

What It Measures

Asking price relative to annual sales. It ignores how much sales become earnings.

How to Interpret It

Lower may be attractive only when margins and risk are comparable. Never value a low-margin business solely because its revenue multiple looks inexpensive.

From Weak to Excellent

1. 1Weak / High RiskPrice is unsupported by earnings and relevant sales comparisons.
2. 2Needs InvestigationRevenue-based pricing with incomplete margin evidence.
3. 3StrongConsistent with comparable transactions and supported profitability.
4. 4Excellent / ResilientAttractive against relevant peers with strong transferable earnings and cash conversion.

What It Measures

The constant annual growth rate that would connect the first and last sales figures. It smooths volatility rather than showing each year’s path.

How to Interpret It

Higher is favorable if profitable and repeatable. Three annual observations contain two intervals; do not divide by three. A strong average can conceal a weak latest year.

From Weak to Excellent

1. 1Weak / High RiskNegative long-term growth with weakening demand.
2. 2Needs InvestigationFlat or inconsistent growth, or growth driven only by price increases.
3. 3StrongVerified positive growth with maintained margins.
4. 4Excellent / ResilientSustained profitable growth supported by customer demand and capacity.

What It Measures

Year-over-year change comparing the latest year with the preceding year.

How to Interpret It

Higher generally indicates growth, but one unusually weak prior year can make a rebound appear exceptional.

From Weak to Excellent

1. 1Weak / High RiskVerified decline accompanied by weakening margins or retention.
2. 2Needs InvestigationFlat, volatile or temporary rebound sales.
3. 3StrongProfitable growth against a representative prior year.
4. 4Excellent / ResilientProfitable growth repeats across multiple periods without concentration or capacity strain.

What It Measures

The share of revenue represented by owner benefit or accounting net income. These use different numerators and should not be treated as interchangeable.

How to Interpret It

Higher generally means stronger earnings efficiency within the same industry. Low labor cost or deferred repairs can inflate margins; a high SDE margin can still leave little cash after replacing the owner.

From Weak to Excellent

1. 1Weak / High RiskNegative or falling normalized margins.
2. 2Needs InvestigationPositive but below comparable firms or reliant on unverified add-backs.
3. 3StrongStable margins supported by comparable accounting and market wages.
4. 4Excellent / ResilientSustained above-peer margins with strong cash conversion and adequate reinvestment.

What It Measures

The report’s estimate of marketing spend per new customer. A full CAC analysis may also include sales staff, commissions and other acquisition costs.

How to Interpret It

Lower is generally favorable for customers of equal quality. Compare CAC with contribution profit over the customer relationship, not revenue alone. $120 is expensive for a $50-profit customer and potentially attractive for a retained $1,000-profit customer.

From Weak to Excellent

1. 1Weak / High RiskExpected customer contribution does not recover acquisition cost.
2. 2Needs InvestigationAcquisition cost is recovered slowly or attribution and retention are uncertain.
3. 3StrongVerified contribution comfortably covers acquisition cost within a manageable payback period.
4. 4Excellent / ResilientCohorts repeatedly generate strong contribution after acquisition costs across scalable channels.

What It Measures

Average annual revenue per active customer. It measures sales, not customer profit or lifetime value.

How to Interpret It

Higher can reflect better pricing or engagement, but also concentration in a few large customers. Compare customer mix, profitability and repeat purchases.

From Weak to Excellent

1. 1Weak / High RiskFalling revenue per customer alongside poor retention or margins.
2. 2Needs InvestigationStable revenue but uncertain contribution or uneven customer mix.
3. 3StrongHealthy per-customer contribution with diversified repeat demand.
4. 4Excellent / ResilientGrowing contribution per customer with strong retention and no excessive concentration.

What It Measures

The portion of annual sales spent on reported advertising and marketing.

How to Interpret It

Lower is not always better. Underinvestment can reduce future demand; a higher ratio can be justified if new customers produce profitable, retained revenue.

From Weak to Excellent

1. 1Weak / High RiskSpending produces inadequate contribution or customer growth.
2. 2Needs InvestigationReturn is uncertain or demand relies on one fragile channel.
3. 3StrongMeasured acquisition and retention justify the spending level.
4. 4Excellent / ResilientRepeatable profitable channels support growth with clear attribution and controlled payback.

What It Measures

Sales allocated across staff. The report label may say FTE, but the current calculation uses reported employees; it is not a verified hours-adjusted FTE measure.

How to Interpret It

Higher can indicate productivity but also outsourcing, understaffing or unpaid owner work. Sales productivity is not profit productivity.

From Weak to Excellent

1. 1Weak / High RiskLow productivity with unsustainable labor cost or service problems.
2. 2Needs InvestigationPositive output but below relevant peers or inconsistently defined staffing.
3. 3StrongCompetitive output with appropriate staffing and healthy margins.
4. 4Excellent / ResilientStrong sustained output with normalized labor, quality and profit conversion.

What It Measures

Annual reported rent as a share of sales. This report does not automatically include common-area charges, property tax, insurance or utilities.

How to Interpret It

Lower generally leaves more room for profit, but location may drive sales. The screener uses up to 10% as favorable, over 10% through 15% as caution and over 15% as adverse; these are app screening bands, not universal industry standards.

From Weak to Excellent

1. 1Weak / High RiskAbove 15% in the screener; investigate whether margins support the burden.
2. 2Needs InvestigationOver 10% through 15% in the screener; examine all-in costs and lease increases.
3. 3StrongAt or below 10% in the screener with supported rent and sales.
4. 4Excellent / ResilientAffordable all-in occupancy remains sustainable after rent increases and revenue stress.

What It Measures

Disclosed inventory and equipment relative to price. This report’s metric excludes real estate and does not establish liquidation recovery.

How to Interpret It

Higher may provide more asset backing, but book values are not cash recovery and asset-heavy operations often require more reinvestment.

From Weak to Excellent

1. 1Weak / High RiskAssets are unusable, overstated or subject to unresolved claims.
2. 2Needs InvestigationLow coverage or uncertain resale values; intangible earnings must justify price.
3. 3StrongVerified useful assets provide reasonable backing for the business model.
4. 4Excellent / ResilientIndependent realizable values, clear title and durable earnings support the price together.

What It Measures

The share of revenue identified as recurring, contracted or repeat. These categories differ in enforceability and certainty.

How to Interpret It

Higher generally improves predictability when customers retain and agreements transfer. The screener’s bands are below 15%, 15% to under 40%, and 40% or more—not universal quality grades.

From Weak to Excellent

1. 1Weak / High RiskBelow 15% in the screener or claimed recurring sales are unsupported.
2. 2Needs Investigation15% to under 40% in the screener; inspect renewal and cancellation risk.
3. 3Strong40% or more in the screener with supported retention and transferable relationships.
4. 4Excellent / ResilientDiversified, profitable recurring sales persist through renewals and ownership transfer.

What It Measures

The share of annual revenue from the largest customer. It measures dependency, not that customer’s profitability or likelihood of leaving.

How to Interpret It

Lower generally reduces single-customer risk. This screener uses up to 10% as favorable, over 10% through 25% as caution and over 25% as adverse. Contracts and retention still matter.

From Weak to Excellent

1. 1Weak / High RiskAbove 25% in the screener; model loss of the largest account.
2. 2Needs InvestigationOver 10% through 25% in the screener; investigate renewal and owner ties.
3. 3StrongAt or below 10% in the screener with diversified retained accounts.
4. 4Excellent / ResilientDiversification and transferable relationships withstand loss of a major account without threatening viability.

What It Measures

The degree to which earnings depend on the seller’s relationships, skills, license or day-to-day work.

How to Interpret It

Less dependency generally improves transferability. An absentee claim is not evidence that the business runs independently.

From Weak to Excellent

1. 1Weak / High RiskEssential owner skills or relationships cannot reasonably transfer.
2. 2Needs InvestigationReplacement is possible but cost or retention is uncertain.
3. 3StrongDocumented staff, systems and a realistic transition support transfer.
4. 4Excellent / ResilientThe business has already operated successfully without the owner, with resilient staff and customer relationships.

What It Measures

Purchase price divided by current SDE. It is a simple earnings-based recovery estimate that ignores debt and assumes earnings remain unchanged.

How to Interpret It

Shorter is generally preferable at equivalent quality. In this report it is mathematically the same ratio as Price / SDE, expressed in years—not an independent valuation signal.

From Weak to Excellent

1. 1Weak / High RiskLong recovery unsupported by earnings quality or buyer criteria.
2. 2Needs InvestigationRecovery exceeds your target or relies on optimistic growth.
3. 3StrongRecovery aligns with your target and verified recurring earnings.
4. 4Excellent / ResilientAttractive recovery remains supported after realistic salary, reinvestment and downside adjustments.

What It Measures

An asset sale acquires specified assets and rights; a stock sale acquires the entity. Liability exposure differs, but neither structure automatically removes every historical risk.

How to Interpret It

There is no numerical ranking. Evaluate transferability, tax consequences, assumed liabilities and legal protections together.

From Weak to Excellent

1. 1Weak / High RiskUnknown obligations or essential rights cannot transfer.
2. 2Needs InvestigationStructure is proposed but diligence and consents are incomplete.
3. 3StrongCounsel identifies liabilities, required consents and tax treatment.
4. 4Excellent / ResilientClear scope, completed diligence, enforceable protections and required approvals support closing.

What It Measures

Adjustments that estimate normalized owner benefit from reported earnings. Only supported, eligible expenses should be removed.

How to Interpret It

Larger add-backs do not mean a better business. Aggressive adjustments can inflate price and debt capacity while real expenses remain.

From Weak to Excellent

1. 1Weak / High RiskMaterial unsupported, duplicated or recurring costs are added back.
2. 2Needs InvestigationSome support exists but eligibility or replacement costs are uncertain.
3. 3StrongEach adjustment is documented, non-duplicated and consistent with ongoing operations.
4. 4Excellent / ResilientIndependent recast reconciles to records and remains conservative after replacement costs.

What It Measures

Trailing twelve months: the latest continuous twelve-month period of results, rather than a forecast or calendar year.

How to Interpret It

There is no good or bad TTM number on its own. Compare it with prior matching periods and annual filings to identify current direction.

From Weak to Excellent

1. 1Weak / High RiskIncomplete months or unexplained deterioration.
2. 2Needs InvestigationComplete period but unreconciled figures or unusual seasonality.
3. 3StrongComplete reconciled period consistent with the underlying trend.
4. 4Excellent / ResilientCurrent reconciled monthly evidence confirms durable earnings and explains all material deviations.

What It Measures

Reconciliation of sales and collections to bank activity and accounting records. Deposits alone are not necessarily revenue.

How to Interpret It

The quality of reconciliation matters—not the size of deposits. A mismatch may be timing, but unexplained differences undermine earnings credibility.

From Weak to Excellent

1. 1Weak / High RiskMaterial unexplained gaps or non-sales deposits presented as revenue.
2. 2Needs InvestigationPartial records or unresolved timing differences.
3. 3StrongSales, collections and bank activity reconcile with documented adjustments.
4. 4Excellent / ResilientIndependent reconciliation across multiple periods supports reported revenue and earnings.

What It Measures

A landlord’s confirmation of specified lease facts such as rent, term, deposits and known defaults. It does not by itself grant assignment consent.

How to Interpret It

No numerical score applies. Clear, current landlord confirmation reduces uncertainty; a signed statement is not a substitute for reviewing the lease.

From Weak to Excellent

1. 1Weak / High RiskMaterial conflicts, unresolved defaults or unavailable required consent.
2. 2Needs InvestigationLease facts or landlord position remain unconfirmed.
3. 3StrongLandlord confirms key terms and required transfer approvals are understood.
4. 4Excellent / ResilientCurrent documentation, adequate tenure and required consents support continued occupancy.

What It Measures

A filing that may give a creditor a security interest in business assets. It identifies potential claims; it is not proof of the current payoff amount.

How to Interpret It

Fewer unresolved claims generally reduces closing risk. A lien can be routine if correctly paid and released; a clean UCC search does not identify every possible liability.

From Weak to Excellent

1. 1Weak / High RiskUnresolved claims prevent delivery of required title.
2. 2Needs InvestigationClaims are identified but payoff or release arrangements are incomplete.
3. 3StrongPayoffs and releases are documented for acquired collateral.
4. 4Excellent / ResilientCounsel confirms title and completes coordinated releases with the closing funds.

What It Measures

An environmental site assessment identifying potential environmental concerns through records, inspection and interviews. It normally does not include sampling.

How to Interpret It

There is no dollar benchmark for a good report. The objective is to understand exposure; absence of identified concerns is not a guarantee of no contamination.

From Weak to Excellent

1. 1Weak / High RiskMaterial unresolved environmental exposure.
2. 2Needs InvestigationConcerns require further investigation or cost estimates.
3. 3StrongQualified review identifies no unresolved material concerns for the intended use.
4. 4Excellent / ResilientAppropriate follow-up, risk allocation and advisor/lender review address identified exposure.

What It Measures

A loan from the seller financing part of the price. Its rate, payment timing, security and priority determine its usefulness.

How to Interpret It

A larger seller note is not automatically better. It can reduce upfront cash, but deferred payments, balloons and lender requirements change risk.

From Weak to Excellent

1. 1Weak / High RiskUnaffordable payments or terms conflict with senior financing.
2. 2Needs InvestigationPotentially useful financing with unclear priority or maturity.
3. 3StrongDocumented terms fit cash flow and senior-lender requirements.
4. 4Excellent / ResilientBalanced, enforceable terms support a stable transfer and remain affordable under stress.

What It Measures

A letter of intent outlining proposed acquisition terms before definitive agreements. Some provisions may be binding even when the purchase proposal is not.

How to Interpret It

No numerical rating applies. Precision and appropriate conditions matter more than length or an attractive headline price.

From Weak to Excellent

1. 1Weak / High RiskUnclear obligations or premature commitments without diligence protection.
2. 2Needs InvestigationBasic terms exist but financing, scope or conditions remain vague.
3. 3StrongAdvisor-reviewed terms clearly identify conditions and binding provisions.
4. 4Excellent / ResilientClear commercially workable terms preserve diligence protections and a realistic closing process.