We launched a highly automated new service division six months ago that is already highly profitable but only shows up in our trailing three-month financials. How do we structure a forward-looking run-rate adjustment to our EBITDA to ensure we get paid for this growth instead of waiting another year to sell?

Question

Tyler Smith · Accepted Answer

Relying strictly on historical trailing twelve-month, or TTM, EBITDA will severely undervalue a fast-growing, automated division, costing you millions in enterprise value. You must convince the buyer's Quality of Earnings auditors to accept a forward-looking run-rate adjustment. To do this, you must present an airtight case built on hard, operational data. First, use your trailing three-month financials to calculate an annualized run-rate for the new division, showing that the revenue and margins are stable and sustainable. Second, back up these numbers with your weekly scorecard history. Show the buyer the customer acquisition cost, customer retention rate, and automated capacity utilization metrics that prove this growth is not a temporary spike. Third, propose a bridge structure in your deal pricing. If the buyer is hesitant to pay for unproven future earnings upfront, structure a fast-track earnout or a post-closing valuation adjustment. This mechanism recalculates the final purchase price based on the actual EBITDA of the new division six or nine months post-close, utilizing your agreed-upon multiple. By using your operating system metrics to prove the predictability of your new division, you eliminate the buyer's risk while securing a valuation that reflects the true trajectory of your business.