40% growth in Year 1 of a Virginia commercial paving business

The Setup

Eric Donahue spent 20 years in the Navy, 13 of them in elite special operations (Naval Special Warfare Development Group). After retirement he pivoted to business ownership in late 2024, working with a military-transition nonprofit and local small business owners in Hampton Roads, Virginia. He built his deal-evaluation framework on a whiteboard with two consulting friends from On Point Building Services using SDE plus estimated owner compensation to back into EBITDA and a defensible multiple range.

The Deal

Peninsula Paving, a 25-year-old commercial asphalt paving company in Hampton, Virginia. Three-year revenue average $4.1M, gross margins around 17.5%, SDE around $700K, adjusted EBITDA around $500K (subtracting an estimated $200K of owner comp). 16 full-time employees. 85% of revenue from 10-12 repeat GC clients. Commercial focus: parking lot patching, maintenance, GC subcontracting. Avoided by large competitors who chase scheduled highway work.

Initial offer: $1.5M (3x EBITDA). Seller countered $100K. Final purchase price: $1.6M, plus $150K of working capital. Total deal value $1.75M. Multiple roughly 3.5x EBITDA.

The Financing Choice (Conventional, Not SBA)

This is the most replicable lesson in the deal. Donahue financed through Town Bank, a local Virginia bank with a pre-existing relationship to Peninsula. The banker, Lisa, had worked with the business previously and advocated for the deal internally. Terms versus the SBA equivalent: better rate, materially lower fees, 7-year amortization (vs. typical SBA 10-year). Personal guarantee required. Donahue strengthened the loan position by separately purchasing the land the business operates on.

The thesis: asset-heavy businesses with physical equipment and real property are structurally suited to conventional financing. The local bank's relationship with the seller removed underwriting risk. SBA's universal availability comes at a real cost in fees and rate that asset-rich deals don't need to pay.

Capital structure: $583K seller note (33%), $1.17M bank financing (67%).

First-Year Operating Moves (40% Revenue Growth)

Five drivers, in roughly the order Donahue executed them:

- Competitor exit windfall. A major competitor was acquired by a large highway-focused company that exited the small commercial paving market. Peninsula captured significant displaced volume. Timing luck, but accepted as it appeared. - Subcontracting complementary services. The previous owner referred sealcoating, line striping, and small concrete work out. Donahue instead subcontracted these services while managing them as the prime, capturing the markup. Especially profitable on military base work where restricted access drove premium pricing above the standard 10% markup. -