Multiple Sanity-Checker

Multiple sanity check: $5.0M for Project Sentinel

1. Implied multiple (calculation shown)

The honest multiple is not 3.5x. The $1.42M includes $340,000 of add-backs, 31.5% of reported EBITDA, none backed by documents yet. If you must hire a manager to replace the owner, 4.1x is closer.

2. Is that reasonable, rich or cheap for this profile?

Working band I am using: roughly 3.5x to 5.5x EBITDA for a business of this size and profile. That is general benchmark reasoning (my estimate), not a market database or a formal valuation, so challenge it.

Pushes up: code-driven demand, 78% recurring on the seller's definition, growth of 8.2% and 7.4% (FS p.2, mine, years undated), a two-decade history.

Pushes down: top account about 22% and top ten about 61% (CIM p.9), founder-held licence (CIM p.14), unaudited statements (FS p.5), "recurring" includes repair work (CIM p.22), 2009 system with untested export (CIM p.16).

View: $5.0M is inside the band on every basis, in the lower-to-middle part. It is not an overpayment on the seller's number, and it is fair, not cheap, on a realistic number. That conclusion depends on the add-backs surviving, which is unproven.

3. What you would be betting on

• That the $130,000 of non-owner add-backs ($65,000 + $41,000 + $24,000) survives a change of ownership, and that the $210,000 owner add-back survives a replacement-manager cost. If only $1.21M is real, you pay 4.1x.
• That Northgate ($1,366,000, CIM p.9) stays through the transition.
• That the founder's licence can be transferred or replaced (CIM p.14).
• That the 2009 system's data can be extracted (CIM p.16).

4. The case for offering less

• Revenue does not reconcile: TTM $6.21M against tax-year 2025 receipts of $5.95M, a $260,000 gap (Tax p.1; mine). Until explained, the earnings base is soft.
• Losing Northgate would remove 22.0% of revenue. The EBITDA effect cannot be sized because customer margin is not in the materials.
• A structure can bridge it without cutting the headline: tie part of the $5.0M to Northgate staying for a stated period, or to the add-backs being proven.

Missing inputs

Gross margin, cash flow, capex, debt and working capital are not in the materials, so this check is on EBITDA only.

This is an analytical aid and not investment, legal, tax or accounting advice, and not a formal valuation. The Project Sentinel documents are synthetic test data.