When I first saw the mug for EBITDAC for sale, I thought it was an attempt at a bad joke. However, it could seriously be considered a new expression for financial earnings moving forward, which represents:
E – Earnings
B – Before
I – Interest
T – Taxes
D – Depreciation
A – Amortization
C – Coronavirus
This is an accounting principle that is vital for every business owner to understand post-pandemic. Prior to the COVID-19 outbreak, if you wanted to sell your business for the most profit, you needed to have a professional M&A firm “recast” your historic financials to remove any one-time expense items that would not be ongoing and part of operations under a new owner.
Some examples of these include:
And lots more. But now to this list, you may be able to add loss of revenue and income due to the impact of the Coronavirus.
Recasting has always been a critical first step in valuing any business for eventual sale. In the past if you didn’t recast these items off your historic financials and you used your tax returns as the basis of your future business projections, your revenue and earnings would be understated and consequently, so too would any offer you receive from buyers.
If any situation can be considered a business disruption, it is the economic impact of a near-total shutdown of our economy for several weeks. This and further disruptions caused as we recover supply chains, employee retention, and so many other areas.
But here is the key: If you don’t have an experienced M&A professional prepare your recasting for you, it might not be done adequately or thoroughly. As bad as that mistake was before COVID-19, it is far worse going forward.
In a recent survey of business owners that we reviewed last week, nearly 40% expect their businesses to have revenue and earnings back to pre-lockdown levels within six months. If you fall into this group, and your original exit plans called for you to find a buyer in 2020 or early 2021, then you need to hire an M&A firm ASAP to get started on your business valuation and recasting.
This is true even if you are not fully able to account for your EBITDAC today. Since it takes 90-120 days to complete most valuations, your M&A team can begin gathering data to document the impact.
I know that for many of you, even as the economy begins to open up, that these are difficult times. The challenges that U.S. businesses have faced have been unprecedented over the past few months. However, it is never too early to begin considering your exit strategies and, as you do, remember how critical it may be to also take into consideration the impact that the Coronavirus has had on your business as well.
To learn more about recasting in general and about Generational Equity’s valuation and exit planning services, please call us at 972-232-1121, or use the following links:
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2021 Generational Equity, LLC All Rights Reserved.
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.Shenille Engelhart, Owner – CLS Technology
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
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