Is your company ready to sell, and what would a buyer discount today?
Buyers reduce their offers for a short list of specific, findable reasons. Read down the list and be honest about which ones describe your company right now. Almost every item here is fixable, and the ones that take the longest are the ones worth starting first.
One customer is more than 40 percent of revenue
EmergencyLikely cause: Concentration risk that changes both the multiple and the structure of any offer
Start documenting the durability of that relationship now, and begin diversification before you go to market
You do the quoting and estimating yourself
EmergencyLikely cause: Owner dependence, the most common reason a good company gets a mediocre offer
Get the estimating logic into a costed system and hand quoting to someone who will still be there after closing
Your financial statements are cash basis and built for tax minimization
EmergencyLikely cause: Earnings a buyer cannot verify, which get discounted or repriced mid-process
Move to accrual statements that reconcile to your returns, and expect two to three years before the record is persuasive
Your top customers only send purchase orders, with no agreements behind them
UrgentLikely cause: Revenue a buyer underwrites as weaker than committed volume
Assemble multi-year order history by part, qualification records, and sole-source documentation to evidence durability
Significant revenue runs on tooling your customers own
UrgentLikely cause: Programs that can move to another supplier quickly, priced at a lower multiple
Build a complete tooling schedule showing title, location, and contract terms before a buyer asks for one
Your quality registration lapsed, or the system is a binder rather than a practice
UrgentLikely cause: A screening filter that removes buyers, plus a credibility problem during the plant tour
Restore the registration if there is 18 months or more, and formalize the systems the plant already uses well
You pay rent to your own property company at something other than market rate
UrgentLikely cause: Operating results that misstate earnings in either direction
Get a market rent estimate and an independent appraisal, then normalize the financials to market rent
Nobody but you knows the setups, the processes, or the customer history
UrgentLikely cause: Key-person risk priced aggressively, and a long transition demanded at closing
Write down the tribal knowledge, and introduce a second contact at every major account
You have not had a Phase I environmental assessment on an older industrial site
Schedule serviceLikely cause: A finding that arrives late in diligence and hands the buyer leverage
Order a Phase I before going to market so the finding and the remedy discussion are on your timeline
Your equipment list, maintenance records, and five-year capital needs are not written down
Schedule serviceLikely cause: An automatic deferred-capex discount applied by default
Build a current equipment list with year, hours, control, and maintenance history, plus an honest replacement schedule
You have never modeled what you would keep after tax
Schedule serviceLikely cause: A structure negotiated before anyone knows which structure is better for you
Have a transaction-experienced CPA model asset and stock structures before any letter of intent is signed
A buyer has approached you directly and you are talking to them alone
EmergencyLikely cause: A negotiation with no competition, where the buyer sets price, pace, and terms
Get a valuation range and build at least a small competitive alternative before you go further
Before you call
What to check yourself
- 1
Take three consecutive weeks off
If the business does not notice, you have proof of management depth that no presentation can substitute for. If it does, you have found your highest-return project.
- 2
Pull revenue and gross margin by customer for three years
This one report answers the concentration question, the durability question, and the profitability-mix question at once. If it cannot be produced, that is the finding.
- 3
Reconcile last year's statements to the tax return
Every difference needs an explanation you can document. Buyers start here, and so does any quality-of-earnings provider.
- 4
List every add-back you would claim, with the document behind it
Add-backs you can evidence raise the price. Add-backs you assert get removed in diligence and cost credibility on everything else.
When to call us
The right time for the first conversation is when you can still choose the year, which is generally two to three years before you want to be finished. It is also the right time if a buyer has approached you directly, because a single buyer negotiating against nobody sets the price. The conversation is confidential, costs nothing, and does not commit you to selling anything.
If you are experiencing any of these, call now:
- One customer is more than 40 percent of revenue
- You do the quoting and estimating yourself
- Your financial statements are cash basis and built for tax minimization
- A buyer has approached you directly and you are talking to them alone
Ready to get started?
Charlotte-region owners of $5M to $20M industrial companies get a confidential valuation range from a mid-market M&A advisor, at no cost. Mon-Fri 8am-6pm ET.