Whatever trend your business is following will get projected forward by PE firms. If you are not growing, even if it is related to structural industry issues like the shipment cliff, PE will forecast further declines going forward and drop their valuation.
Fortunately, it also works in reverse. If you are growing and EBITDA (earnings before interest, taxes, depreciation, and amortization) is on the rise, the valuation of your company will likewise grow. This means the best time to sell a business is after a series of good years with each being better than the one before it. When the company is on an upward trajectory is when your business is ready. This does not, however, mean that you are ready.
In the next Hotmail, I’ll address how to identify when you, personally are ready to sell.
For more information about preparing a business for sale, visit the Service Roundtable at www.ServiceRoundtable.com. For inspirational stories with business lessons for contractors, by Matt Michel’s book, Contractor Stories at Amazon.com.
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