6d • General discussion
The Spreadsheet Showed Profit. The Operation Showed Debt.
The seller’s financials showed strong margins.
Then the buyer visited the site.
The reason became obvious.
The facility was understaffed.
Repairs were delayed.
Customer complaints were rising.
The owner had been protecting margins by starving the business.
That can make trailing earnings look better than reality.
A buyer who values the business off those margins may be paying for deferred expenses.
This is one of the quiet traps in small business acquisitions.
Not all profit is quality profit.
Sometimes high margins reflect operational excellence.
Sometimes they reflect underinvestment.
The difference matters.
Before paying for strong margins, ask what created them.
Efficiency?
Pricing power?
Systems?
Or delayed maintenance, tired employees, and customer frustration?
The spreadsheet may show profit.
The operation may show debt
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The Spreadsheet Showed Profit. The Operation Showed Debt.
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