From $400k to -$200k EBITDA: How Do I Value This Deal?

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March 07, 2025

by a searcher from University of Washington in Seattle, WA, USA

I'm considering acquiring a business that previously generated $300-400k in trailing twelve-month EBITDA. However, recent performance has declined sharply, with current TTM EBITDA projected to be around -$200k. The business holds substantial, seemingly collectible accounts receivable exceeding $1 million. Given the dramatic EBITDA fluctuation, traditional valuation methods using multiples are ineffective. How should I approach valuing this business?

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Reply by a searcher
from University of California, Berkeley in Seattle Metropolitan Area, WA, USA
Traditional valuation methods would work, you just do it over a time period. Really depends on understanding what the occurrence was. Now, if you need a lender to get this done, that could be very tough with the negative year being the current period.

Ultimately it boils down to you de-risking it enough to go forward (if you want), the seller agreeing to take (far) less than what they want, and the lender seeing how/why the negative number will "correct" itself (if that's the case).

I've seen multiples applied on an average of TTM, multiple years, best year, etc... Can always structure it to 'right-size' the multiple and preface that on an earnout/note tied to achieving ebitda/revenues/whatever metric within a 3-yr (or however many) lookback.
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Reply by a searcher
from The University of Chicago in Chicago, IL, USA
I would look at customer concentration, did a large customer walk away or is it a general down turn? Did a sales person leave the company recently and take the relationship with them? You would have to also weigh your findings on type of company/revenue - i.e., company type (manufacturing or service)
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