An illustrative acquisition analysis: the 23% customer problem.

Illustrative case on Hoosier Supply Co., our sample company. The figures are the sample Exhibit Book’s.

What was the buyer trying to learn?

Whether the earnings hold, and how much of the revenue rides on one customer, before the price and the financing are set. A self-funded searcher is buying an HVAC and plumbing distributor with $11.0 million of revenue, and the seller’s financials look orderly.

This is the buyer’s own review. Who orders the lender’s report on an SBA 7(a) loan is a separate question, answered in Who Orders the QoE on an SBA Deal.

What does a Lite QoE test?

Reported cash and earnings, the proposed adjustments and historical working capital, with revenue read by customer. Management interviews and deeper customer or operating diligence are added where the written scope includes them. Core adds a tested working capital peg and margin by product, customer and channel.

What did the review find?

The earnings hold at $1,247.1K of Adjusted EBITDA, and receipts agree to the bank. Reported trailing-twelve-month EBITDA is $833.5K, and eight add-backs were claimed. Five clear the three gates. The four that fall in the trailing twelve months add $413.6K: owner compensation reset to market ($250.0K), the employer payroll taxes on it ($3.6K), personal and discretionary expenses ($70.0K) and the related-party rent brought to market ($90.0K). The fifth, a $95.0K legal settlement in FY2024, sits outside that window.

Three fail and are not added back, $139.0K together: a rebrand that recurs, an estimate of personal spending with no ledger tie and a marketing program that runs every year. The seller’s schedule counts all three, for $1,386.1K. Priced at four times earnings, as in our acquisition financing example for this company, those three are about $556K of purchase price.

One customer is 23% of revenue with no supply agreement. It buys on open purchase orders, so there is nothing to assign at close. The top ten are 69% of revenue across 212 active accounts.

The same report sizes six more findings: sales and use tax nexus in three neighboring states ($60K to $90K, plus penalties), two contractors who work as employees ($20K to $40K), the owner’s warehouse lease at $90.0K a year above market, a vendor agreement covering 41% of purchases that needs consent on a change of control, owner dependency and a seasonal working-capital trough. Page 2 of the sample report gives the protection each one points to.

How does a buyer protect against losing a 23% customer?

Through the deal terms. With an account this size, a buyer meets the customer with the owner before close, tests retention and models the loss of the account; at Lite scope the margin on it is still open. Counsel then drafts the protection, such as a holdback or an earn-out tied to the account. Some buyers revisit the price or the structure, and some walk away.

If the buyer finances with an SBA 7(a) loan at the $5.0 million price in that financing example, the tested earnings cover debt service 1.73 times, against SBA’s 1.25x floor.

A seller two or more years from a sale can put a written supply agreement in place with the top account and move that relationship off the owner; the share itself takes longer to bring down. The Exit Readiness Review sizes the concentration and the owner dependence on the seller’s own books.

The read: the earnings are real, and the customer risk belongs in the deal terms. The buyer and its advisers set those; the report gives them the figure to set them on.

The same sample company, elsewhere on the site

• The buy-side Lite sample report, ten pages, with this exhibit on page 6
• The three gates an add-back has to clear, and the three that failed
• The concentration thresholds and the reference calls a buyer runs on the top account
• The five critical seats and who holds them
• The financing and the coverage test on the same earnings
• The sell-side Lite sample report and the Exit Readiness Review, for the seller’s view
• How we work with searchers and ETA buyers

Built from the buy-side Lite sample report dated August 19, 2026. Ryan Anoskey, CPA, leads the work and Jared Luegers, CFA, performs the second review; LIMESTONE issues the report.

Illustrative case; it describes no client, negotiation or closed deal.