You Can’t Sell Your Way Out of Bad Margins

survived the storm We just completed a business valuation for a client and they had a fantastic year in 2021. Their revenue increased by 13% in 2020 and then by 31% in 2021. Our conclusion: The business is worth less now than it was before the revenue growth. Our valuation of the company was based off a multiple of the established earning power of the business (commonly referred to as EBITDA). The percentage of EBITDA dropping to the bottom-line decreased from 21% in 2019 to 13% in 2020 to a projected 10% in 2021. The business made less money in 2021 while doing close to $1,000,000 more in revenue.

The owner of this business is not a bad or negligent owner, they just need to refocus their efforts. 2020 and 2021 both represented an extremely difficult time for small business owners with stay-at-home orders, shipping delays, and increases in product costs to name a few. Navigating this storm shifted focus away from improving the business to just surviving the ever-changing landscape. None of these issues have been completed resolved, but hopefully as a business owner you are now in a place where you are confident that you can handle anything and you can get back to improving your business. Pay particular attention to your margins because while you were figuring out how to survive the last 2 years, your costs likely increased a significant amount and those changes need to be identified and corrected in order to preserve the value of your business.

What Client’s Say

We Couldn’t Be Happier

"When we thought about selling we had no idea what our business was worth or how to go about selling. What you were able to do was to cut through the fog so that we understood the valuation issue and had a comfort level with the process. As you know we ended up selling for somewhat more than the original valuation and we got all cash and our CPA loved the way our tax liability was minimized. We couldn’t be happier!"

Over $250,000 More

"Our first contact with you shocked us when you suggested that we wait 18 months before selling because you believed that if we hit our projections that the value would be significantly greater. As it turned out we not only followed your advice but also got slightly over $250,000 more than we originally had hoped for. It is seldom that we have had the opportunity to deal with a firm that doesn’t want both money and a commitment NOW. It was clear and obvious that you had our best interests at heart."

You Got the Valuation We Agreed On

"You did a great job on the sale of our business in really beating the bushes for buyers, including a UK company that was an active suitor. You managed to get the valuation that we had all agreed upon and got it substantially all in cash and got the transaction closed with little to no problems or expensive lawyers involved."

Thank You for Handling Our Business

"Our business was smaller than what your firm normally handles but it was a BIG part of our net worth and savings. Thank you for handling our business and we were very pleased and delighted with the results."

More Than Anticipated

"Our transaction was involved as we had different corporate entities located in different states. Our only regret is that we didn’t retain your services before 2012 when we paid $25,000 to a firm in Texas that did a valuation and market analysis for us before then failing to do anything in the way of trying to sell our business. You got it sold for more than anticipated."

The Sales Process