Would like some perspective on retail business purchase. $2.2M in annual rev, ~$700k gross profit, ~$320 SDE

Business owners want to retire. They take home about $320k a year. It's split between the building and the business.

We're not looking to purchase a job, but rather diversify our investments. There are 2 owners, 1 spends a few hours doing the books, and the other works full time but not as manager (he does it for the love of it).

The staff there is strong and dedicated. There's a store manager who basically runs the business. We know we'd need to hire another person, and probably another seasonal person.

I'd be financing the purchase.

With the costs of the additional staff, plus the debt service (~$200k / year) needed to cover the loans, we should have a take home of ~$50k.

The downpayment would be ~400k.

In my head, this seems like a reasonable 12.5% annual rate of return.

We've also identified a number of opportunities to improve the net profit to improve that return. We also believe providing equity to the manager, and a couple other key people as part of this would show our appreciation and desire for them to be a meaningful part of this business.

Am I thinking about this correctly? Would you do this deal?