The method
The Arcane Score
A 0 to 100 screen that tells you whether an asking price and structure can work. It is transparent on purpose: three inputs, fixed thresholds, no hidden weighting.
The score exists to answer one question quickly: is this deal worth another hour? It is calculated by the workbench calculator from the numbers you enter, and nothing else. It does not know anything about the business that you have not told it.
The three components
| Component | What it measures | Points |
|---|---|---|
| Price multiple | Asking price divided by SDE | 35 if 3.0× or less; 15 if over 3.0× up to 4.0×; 0 above 4.0× |
| Debt service coverage | Cash available for debt divided by annual debt payments | 35 if 1.5× or more (or no debt); 15 if 1.25× to 1.5×; 0 below 1.25× |
| Cash-on-cash return | Annual cash after debt divided by cash invested | 30 if 25% or more; 15 if 10% to 25%; 0 below 10% |
The total is out of 100. A score of 40 is the default Scout filter: below that, at least two of the three tests failed outright.
How each input is calculated
Cash available for debt is SDE minus the replacement compensation you enter (what it would cost to pay a manager, or yourself, a fair wage) minus the annual capital expenditure reserve. If you will work in the business yourself, enter a real salary anyway. A deal that only works if you work for free is a job you paid to buy.
Annual debt payments combine the acquisition loan and any seller note, each amortized monthly at its own rate and term.
Cash invested is your down payment plus closing costs and working capital.
The warning flags
Separately from the score, the calculator raises a flag when:
- the price exceeds 4× SDE,
- modeled coverage is below 1.25×,
- modeled cash-on-cash return is below 10%, or
- annual cash flow after debt is negative.
Lenders apply their own tests. SBA SOP 50 10 8.1, Appendix 15, requires 1.25× coverage for initial acquisitions and 1.15× for qualifying business expansions. The workbench's 1.25× screen is a simplified planning check, not the lender's EBITDA-based underwriting or evidence of eligibility.
What the score cannot tell you
- Whether the SDE is real. Garbage in, garbage out. Score the seller's figure, then score your own rebuilt figure, and compare.
- Concentration and transferability. A business with one customer providing half its revenue can score 100 and still be a poor purchase.
- Trend. Three years of declining revenue and three years of growth can produce the same SDE.
- You. Fit, skills and appetite for the work are not in any formula.
Use the score to decide where to spend time. Use due diligence to decide where to spend money.