Buying Criteria and Valuation Basics
We understand that selling your business is about much more than financials—it’s about our mutual fit. Here are the basics of what we’re looking for, and a guide to valuing your business, so you know how we approach this important decision.
Our Buying Criteria
Industry: 802 Labs is a boutique acquisition company solely dedicated to music and audio product companies.
Strategic Fit: Preference for manufacturing companies, those with U.S. domestic contract manufacturing, or those with a path to bringing production to the USA and/or vertically integrating. Companies should ideally have a strong customer base in niche markets. We value longevity and consistency of customer demand over the latest technology and trends. Open to carve-outs and divestitures.
Product Categories: Preference for accessories, wired microphones, effects, acoustic guitars, and select live sound and audio production equipment. Strong preference for hardware but open to considering compelling software and services. Open to component suppliers to the industry. We generally avoid tech, retail, and distribution, but are open to evaluating each business on its own merits.
Revenue: This is far less important than profitability: we are focused on acquiring cash flow. Guidance of $1–$10 million in annual revenue with ability to consider smaller deals.
Profitability: This is the big one for us. We are seeking deals that reliably produce in the $750,000 to $1 million in SDE (or EBITDA, or net profit) range. Our priority is to accumulate cash flow to fund future deals. As we grow, we will be able to consider smaller opportunities and other types of products. Because of this strategy, we cannot consider turnarounds, pre-revenue companies, and distressed assets at this time.
EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) is a measure of the profit produced by the core business.
SDE (Seller’s Discretionary Earnings) is available cash that can be used for owner’s compensation including personal expenses.
Team and Culture: We seek companies that have a passionate, experienced team that embodies your company’s values. Company culture that aligns with collaboration and craftsmanship.
Location: We are open to companies based within the United States only at this time.
Even if your business does not fit the 802 Labs criteria, I want to help every M.I. company founder and owner realize the best possible outcome for their hard work and sacrifice. Learn about advisory services to help you explore and understand the exit options that may be available to you.
How We Value Your Business
Valuation might seem complex, but we take a transparent and respectful approach. Here’s a simple way to understand how we consider the value of your business:
Start with EBITDA, which is how much profit your business generates from core operations.
Apply a Multiple: Businesses like yours are typically valued at 1.5x–3x EBITDA. The exact multiple depends on:
Growth potential: Is your revenue and profit increasing steadily?
Market position: Are you the Number One player in your niche?
Customer base: How loyal and stable is your customer base?
Intellectual property: Do you have unique technology or processes?
Adjust for Unique Factors: Factors like seasonality, dependence on a key person, or opportunities for operational improvement may influence valuation.
Consider Assets and Inventory: We generally are not interested in Real Estate but will consider the Fair Market Value of assets and inventory.
What We Value Beyond Numbers
We don’t just look at financials. We care about:
Your vision: The future you’re trying to create for your customers.
Your people: The team that helped build your success.
Your legacy: Preserving the values and culture that define your brand.
Next Steps
If you’re considering selling your business, let’s have a conversation. Together, we’ll explore how we can grow what you’ve built and ensure your legacy continues to thrive.