We were introduced to this business in October 2016.  At that time its revenues were approximately $5.5 Million, its books were on the cash basis and revenue was allocated among product lines using a predetermined formula.

The business was in the fortunate position of having its customers prepay for its services.  The business was also recession resistant, though there was some concern that its services could be rendered obsolete in the medium term (10-15 years in the future). 

As we studied the business and were on-site 2 days per week we began identifying ways to link financial reporting to actual records of services sold working toward being able to see trends and margins for each service category.

We recommended that the client convert to accrual basis for tax and book purposes,  Not only did this provide better financial statements each month, it saved the owner approximately $300K in taxable income in 2016.  We also identified recruiting as a critical bottleneck for growth and suggested a new stategy which more than doubled the new hire pipeline. 

As 2017 went on we evaluated two potential acquisitions and a startup joint venture.  We also started meeting frequently with the owner acting as a sounding board and to understand at a base level what he wanted to accomplish.  He had grown the company from essentially zero to where it was in 2016.  Though he wanted to keep growing it, he recognized that he did not have the toolbox to grow it to the next level.

Moving through 2017 and into 2018 we identified a few options for him moving forward with a focus on the owner making sure he and his family were "set for life".  They were:

Running the company as a cash cow - halting intentional growth, cutting administrative headcount and investing only at a minimum to sustain cash flow. 

Growth of the business by creating a formal plan, staffing and investing to that plan and then executing the plan. This plan would include acquisitions that made sense along the way.

Sell all or part of the business giving the owner the ability to cash-in on his efforts to date and eliminate the risk associated with continuing to hold the business as the threat of obsolescence began to work onto the near term. 

We modeled out each of the alternatives so we could have meaningful discussions and we encouraged him to talk to his spouse and think about the future in more than financial terms.  This is a life decision and finance is only a part of the decision.

The decision was made to sell the company.  Through the rest of 2018 and 2019 this became the focus and we continued to refine financial reporting.  Because we had been improving the financial reporting from the start, we were in a position to create a long term forecast that aligned with the financial reporting and that would allow a sophisticated buyer to assess the business.

At the time of the sale, the company had grown to $7 million in sales and was on pace to hit its 2019 (and beyond) projections for sales and profitability. 

This is a success story we are very proud of.  We believe our efforts were able to help the business owner and the investment banker to maximize value.  At a more human level we were able to help a family create a spectacular future for itself.

If you'd like our help in creating a similar success story or if you are a M&A professional who has a client who could benefit from bolstering their financial reporting, please contact us to begin the discussion.