6 min read · 725 words
At a glance
- A $25M consumer products manufacturer had a real business and a willing market, and the sale kept stalling on one thing: a P&L the owner could not stand behind.
- The bankers put the business at $25M to $35M. The owner did not trust the numbers under that estimate, so he could not go to market, and every month of waiting moved the sale date further out.
- Once the numbers were true, we modeled a path from roughly $21M to $52M in enterprise value. Same company. The difference was believability.
A real business, a willing buyer, and a P&L nobody trusted. That combination almost killed a $25M deal, and the story is worth telling because the problem was never the company. This piece walks through how a good business nearly stalled out on believability, and what actually turned it.
What was wrong when we started?
Not the business. The manufacturer was real, growing, and the kind of company a buyer wants. The problem was underneath: the financials could not have survived a quality-of-earnings review. Margin swung on bad entries, revenue was recognized inconsistently, the close landed weeks late, and cash sat unapplied on the reports.
The bankers still put a number on it, $25M to $35M. But the owner did not trust the P&L behind that number, and he knew a buyer’s analyst would not either. So the estimate did not reassure him. It worried him, because he could see the gap between the headline and what the numbers could actually prove.
Why did that nearly kill the deal before it started?
Because it froze the owner. He had wanted to sell for months, and he kept deferring, not for the market, but because he did not feel he had numbers he would be willing to show. Most owners are not waiting for the right market. They are waiting for numbers they would be willing to show, and this owner was living exactly that.
And the cost of the freeze was real. A buyer wants a trailing twelve months he can believe, so the clock on a believable trailing twelve does not start until the numbers are true. Every month the owner waited on numbers he could not trust, the earliest credible sale date moved out with him.
What turned it around?
The unglamorous work, in order. We fixed the costing so margin told the truth instead of swinging on an entry. We rebuilt the close so numbers landed current. We made revenue recognition consistent so the top line could be defended. We tracked down cash that had come in and never been matched. None of it was clever. All of it was making each number mean what it said.
Then the estimate changed shape. With numbers the owner could finally stand behind, we modeled a path from roughly $21M to $52M in enterprise value, against the bankers’ earlier $25M to $35M on numbers he did not trust. Same company, same market. The difference was believability, and believability turned out to be worth more than any single operational change available to him.
What the story teaches
Three things carry over to almost any owner within a few years of a sale:
- The business is usually fine. The numbers are the risk. Do not confuse a believability problem with a performance problem.
- Fix it before the buyer, not during. In the room you are reacting. Before the room you set the terms.
- Waiting has a price. The clock starts when the numbers are true, so starting early is the cheapest move you can make.
Where this leads
This is the lived version of why deals die in diligence and it is almost never the business, and why the trailing-twelve clock does not start until the numbers are true. The findings that would have surfaced are in five findings that re-trade a deal, and the fix is numbers a buyer can believe.
The Sellable-Numbers Scan runs the read a buyer’s analyst would run and dollarizes what it finds, in 14 days, guaranteed: at least 3x the Scan fee in owner-accepted value identified, or you pay nothing.
If that is the question in front of you, book a fit call. Thirty minutes, no pitch.
Russell Fette · Decisive Finance · Creator of Financial Rhythms™