Model EBITDA, free cash flow, working capital requirements, debt capacity, and the equity check to close the deal.
| Metric | What it means | Benchmark |
|---|---|---|
| EBITDA Margin | Operating cash generation before capex and debt service | 10–18% for light mfg |
| Capex Intensity | Maintenance capex as % of revenue — the "toll" on FCF | 3–6% for light mfg; higher for process mfg |
| Cash Conversion Cycle | AR days + Inventory days − AP days | <60 days is healthy; >90 days is a cash trap |
| NWC % of Revenue | Working capital relative to scale — higher = more cash needed to grow | 10–20% for most mfg businesses |
| DSCR | FCF ÷ Annual debt service — lenders want >1.25x | >1.25x to finance; >1.5x comfortable |
| EV / EBITDA | Purchase price multiple — the market price of the business | 4–7x for light mfg; higher for recurring revenue |
Manufacturing businesses often have significant working capital requirements baked into their balance sheets. When you acquire the business, you typically acquire the working capital with it — but the price negotiation often centers on EBITDA multiples, not NWC. Make sure the LOI specifies a working capital target and a peg mechanism, or you may end up funding a working capital shortfall out of pocket post-close.
Use the Working Capital Cycle calculator to model this in detail, including the cash implications of growing the business post-acquisition.
SBA 7(a) loans are commonly used for small manufacturing acquisitions. The rule of thumb for debt sizing is 3–4x unlevered FCF, with lenders targeting 1.25x+ DSCR on an annual basis. If your deal doesn't clear 1.25x DSCR at your assumed debt load, expect lenders to either reduce the loan amount or ask for additional collateral.
An editable Excel workbook — 5-year income statement, balance sheet, cash flow, DCF + exit-multiple valuation, and a deal tab with debt schedule, IRR & MOIC. Pre-filled with the inputs above; every assumption recalculates.