Illustrative example. Ridgeline Mechanical is not a real company. Every figure on this page is synthetic, built to show the shape of a first-order screen. No client data appears here.
First-order FDD, demonstrated
The seller called it $412,000 of adjusted EBITDA.
Four lines later it was $326,800.
This is what a screen produces before anyone signs an LOI. It reads the accounting system directly, so every adjustment below traces to a specific entry rather than to a conversation with the seller. 21% of the presented number did not survive.
Ridgeline Mechanical
Residential and light commercial HVAC, single location, 19 employees
TTM ending 30 June 2026
- FY2024 revenue
- $3,610,000
- FY2025 revenue
- $3,940,000
- TTM Jun-26 revenue
- $4,240,000
The adjustment bridge
Every line traced to what caused it
Seller-presented adjusted EBITDA
$412,000
Replacement management cost
− $52,000
The seller added back all owner compensation. A replacement service manager at market costs $52,000 more than the salaried staff who remain.
Capitalized truck repairs
− $28,400
Two engine rebuilds booked to fixed assets in March and September 2025. These are maintenance, not capex.
Recurring "one-time" legal fees
− $19,600
Presented as non-recurring, but the same vendor appears in all three fiscal years at a similar amount.
Owner personal vehicle expense
+ $14,800
A legitimate add-back the seller understated. Two vehicles leave with the owner at close.
First-order adjusted EBITDA
$326,800
At a 4.0x multiple, the $85,200 difference is $340,800 of purchase price.
What the screen flagged
Four of the eleven flags raised
- HighCustomer concentration
One property management client was 31% of TTM revenue. Their contract renews in February 2027 and does not assign on a change of control.
- HighExpense classification
$28,400 of vehicle repairs sits in fixed assets across two entries, overstating EBITDA and understating the maintenance the fleet actually needs.
- MediumWorking capital
DSO moved from 34 days to 51 days over eight quarters. At the current run rate that is roughly $131,000 of additional cash tied up against the FY2024 baseline.
- MediumRevenue quality
22% of TTM revenue is new-construction install work, which runs 11 points below service gross margin and tracks local housing starts.
What this was built from
- Source
- QuickBooks Online, read only
- Period covered
- 3 fiscal years
- General ledger lines read
- 41,207
- Flags raised
- 11 across 4 categories
Your target’s books will say something different.
That difference is the whole point of screening before you commit. If you have a deal in front of you, upload the financials or talk with us about what a first-order screen could surface.
Dylan Jones, Zenith Analysis
dylan@zenithanalysis.com