• 36:52
SUMMARY KEYWORDS
Profitability, key metrics, manufacturing, cash flow, inventory accuracy, financial reporting, EBITDA, client concentration, management structure, supply chain, tariffs, business valuation, financial processes, QuickBooks, NetSuite.
SPEAKERS
Damon Pistulka, Jason Kruger
Damon Pistulka 00:03
All right, everyone, welcome once again. The faces of business. I am your host, Damon Pistulka, and I am excited for our guest today, because we have nothing, no one more special today than Jason Krueger from Citron, Cooperman, Jason, great to have you back again on the show. Great.
Jason Kruger 00:23
Thanks. Damon, really appreciate it. Yep, we hit
Damon Pistulka 00:27
little bit of technical difficulties getting going, but now we’re here. It’s going to be awesome, because we’re going to be talking about, are you profitable, and key metrics every manufacturer should monitor. So Jason, we always like to start out talking a little bit about your background. Let’s talk about what you’ve been up to, how you got into doing what you’re doing today, and then we’ll get on to key metrics for manufacturers.
Jason Kruger 00:50
Yeah, absolutely. So as you can imagine, my background is in finance and accounting. Cut my teeth in some of the larger national firms here in the US. Most of that time was with Deloitte, which is one of the big four accounting firms, spent first about 10 years in financial statement audit. But as I was even working with our clients at Deloitte, I saw that, you know, there was a real the mid, what I would consider the smaller mid market. You know, companies really were struggling as it relates to the sophistication around and the value they were getting out of the finance and accounting function of their business. And so what I mean by that is, a lot of companies when they first get started, you know, accounting is necessary evil, meaning you gotta, you gotta, you got to invoice, you got to pay your bills. Got to make sure you have enough cash for payroll, and you got to make sure that you could do taxes at the end of every year. And then, as they grow, they realize that, you know, it’s critical to one know your numbers, get good information, to be able to dig in deeper into the numbers so you can continue to improve your business that’s in from an internal perspective. But also, if you want to establish banking relationships, if you want to exit at some point in time, having an understanding of what those numbers look like is critical in being able to provide them to third parties. So the first thing that your banker is going to ask you if you want to if you want financing is, let me see your financials. And the first thing that an investment banker or a potential buyer is going to ask you if you want to sell your company is, let me see your financials, right, or what your financials look like, or what’s your EBITDA or something like that. So having your hands around that is critical. So I started a company called signature analytics that provides, provided outsourced accounting support for companies on a very on a fractional, fractional, flexible basis. And so what that means is providing the accounting and financial leadership that these companies really lack, and then filling in the gaps where there might be needs and pain points so that they were able to have good processes to close the books every month, produce good finance, monthly financial reporting, communicate effectively to the bank, really dig deeper into their financial information, which you know we’ll start talking about in a little bit as well. We built that up to about 75 full time employees, and then we were acquired in November, on November 1 of last year, 2024 and joined by Citron Cooperman. So just celebrated our one year with citron Cooperman. We slid right into, they have a they had a service that was very similar and complementary to what we did. And so slid right in citric Cooper, Manos, full service CPA, firm that also does supports our clients on a tax perspective, from a tax perspective, audit other what we call advisory service lines, consulting service lines, but our focus is the same core, you know, mid market, that we were focused that I was focused on before, and I’ve always really been focused on so lot of small startup businesses, all the way to the mid market companies, from 5 million to 500 million is probably our sweet spot. But I’d say the core of the companies that I work with personally are probably in that 10 to 100 million range, all shapes, sizes, industries, everything, yeah.
Damon Pistulka 04:24
So, Jason, what do you really like about working in that size or with those size of organizations? Yeah.
Jason Kruger 04:31
I mean, one, you can make an impact more quickly, yeah? And use, you know, there’s a direct line to the business owner in a lot of cases, and decisions can be made more quickly. And you know, we can really, you know, if we can really establish the processes to get good financial information, we can start to see results very quickly as well. And so there’s obviously a lot less red tape. Not. As, not as much complexity as, you know, a fortune 500 or public company, but there’s tremendous value that can be that is there that can be had by leveraging the financial information to make decisions to achieve the goals that you have as a business owner.
Damon Pistulka 05:18
Yeah, yeah, it’s a big deal. So when you first approach or talking with some of these businesses, what are some of the the common points that you see where, where you guys can come in and really make an impact?
Jason Kruger 05:33
Yeah, it, you know, usually starts with cash flow. So, you know, especially in manufacturing, right? Because in manufacturing, you have to a lot of times you’re buying the product, so you gotta, you gotta pay cash out the door, yeah, then you have to, then it goes into inventory. So what I like to say is, what’s inventory? It’s really, it’s cash on the shelf, right? So your cash is now on the shelf in the form of inventory. Then you got to manufacture, or where you got to manufacture, you got to go put it through that process, then you have to sell it, and then you have terms with your customer so they may pay you in 3060, 90 days. So that cash cycle can be very long. Manufacturing side of things. Now there’s ways to improve that through maybe taking deposits from customers up front or something, you know, something like that. But that cash cycle could be long. So one is, I’ve talked to a number, you know, several business owners that say, Hey, look at my financials. I’m it says I’m making money. It says I’m profitable, but I don’t have any cash. You know, where is it? Yeah. And I say, Well, you know, I great your your PNL says you’re profitable, but where is your cash is? Let’s take a look at your balance sheet, and it’s either hung up in inventory. It’s either in your AR because you haven’t collected or collecting timely. Maybe sometimes you’re paying your vendors too quickly, or in some cases, your financials are not really accurate, and you’re you’re actually not as profitable as you think you are. And so the for businesses, especially manufacturing, the small, midsize tracking inventory is the biggest, one of the biggest challenges. Yeah, and if your inventory number is not accurate, your PNL is not accurate, your cost is not accurate, which means your margins and then your profitability numbers aren’t accurate. And so really dialing in and making sure you have confidence that an inventory number is critical, and I see that a lot as well.
Damon Pistulka 07:31
Yeah, yeah, it is. That is a great way to look at inventory, though. It is cash on the shelf, and that the words you just said, I’m profitable, but I don’t have any cash. Is very common across manufacturers, like you said, because, you know, you could, you could grow significantly in a year, and all of it is eating up in cash and AR, right?
Jason Kruger 07:54
And that’s where, you know, building a partner with a bank or financing institution is important. And again, that’s where numbers are important as well, which is one it’s in order to get financing, you want to be able to show good numbers, not just hit print on QuickBooks, but give them a good package that shows tells the right story. But also, if you have your numbers, you know how much you you should be asking for and using, because when you are using somebody else’s cash, like a bank, you’re still paying interest, and that that deteriorates your profitability too. So be able to maximize and leverage the right amount of cash for growth, but not use, or, you know, financing, but not use too much where you’re throwing, you know, interest, interest out the door. Either is important.
Damon Pistulka 08:38
Yeah, yeah, it is a big deal. So when, when you come in and you talked about processes now, what are some of the processes that you typically would would see in a manufacturer that really helped to solidify the numbers?
Jason Kruger 08:54
Yeah, so I look at, when I when you look at the financial or accounting cycle of a business. You look, I always look at the day to day, day to day activities. So you know, what’s our process to invoice? What’s our process to pay bills, right? And so those two processes have a significant impact on cash and cash flow, depending on how you go about those things, what your terms are, what your agreements are with your customers. So breaking it down all the way to you know, how you negotiate with your customers and vendors is is critical from a cash flow perspective. So having a process, not just an ad hoc, hey, we’ll pay bills when we can. We’ll invoice, you know, randomly. But what is our process? What are our terms? How often do we invoice those types of things, and then having a good process and team to do that effectively and accurately. The second then is the monthly close process, which is, do we have a good process where we can close the books every month quickly and then ultimately produce good monthly financial information? So basic financial statements is a starting point, your balance sheet, your PNL. We should be doing, you know, throughout the month, with most of our clients, we do a weekly cash flow forecasting. We have a tool. So looks forward to several months, 13 week cash flow, but starting with the basics, the balance sheet and PNL, and then starting there, from there to start digging, digging into the details. Yeah, if you have bank financing, do they have covenants? Let’s make sure we’re tracking those, to make sure that we’re, we’re not outside of, you know, in non compliance. Let’s start digging into our revenue streams and and the cost of and the costs associated with those to really not understand our margins at the global level, but breaking it down by, let’s say, product lines, we understand what products are more profitable than others that may adjust how we what products we push more into the marketplace. Really digging into the margin is critical, because lot of times I’ll ask a business owner, hey, you know, what are your margins? And they’ll say, Well, it’s somewhere between 40 and 50% 40 in favor. That’s a big difference, yeah. And if you’re talking $10 million company, yeah, you know, one percentage point in margin is $100,000 yeah. And so we don’t want to track we don’t want to just say hi, you know, it’s somewhere between here. We want to track it to the percentage get to a point where we can track it to the percentage point, yeah. And then once we understand that, we can see the trends, and we can start to say, Okay, now, how do we add an extra percent here? What can we do to add an extra percent? And then you’ll start to see the results of that, hitting the bottom line, the cash flows, those types of things. And so that’s really the starting point. Is getting a process where you’re seeing good data on a monthly basis. And then once you have that, then you can start to say, Okay, well, what type of information do I need? More frequently, weekly or daily or real time. And that’s where you can start to to leverage technology and maybe the systems that you’re using to be able to provide you with snapshots of information that you might like to see on a real time basis as well. Yeah, so there’s a number of different ways we’ve done that. We we’re big. We work with a lot of clients, on QuickBooks, on on NetSuite. We leverage power, Microsoft, power, bi, quite a bit to be able to go and extract the data and normal, you know, produce, you know, real time dashboards of sex, types of things.
Damon Pistulka 12:34
Yeah, it is. It is really in manufacturing. If you can get there’s a huge difference going from monthly to weekly to really understanding what you’re doing and when, early in my earlier in my career, I did turnarounds and when arounds in a manufacturing company, we would almost essentially close the books every week just to understand where we were at. Yep. And you knew, you know, did we make progress or not? Every week going towards it, because that is, it is. And it’s amazing how that that can just those practices when you need them, are very valuable, but when you’re making money, they kind of fall to the wayside, because it’s like, oh well. But when you use that weekly true up, not even really a true up, but a weekly check in on those. And even, like you said, real time, especially in a process kind of orient thing, it’s huge. What it’ll do every year,
Jason Kruger 13:34
yeah, for sure. And the other thing I kind of hit on before, but is, do you have a good process to track inventory, yeah, that at a minimum, you’re getting, you know, solid inventory numbers on a monthly basis. And if you don’t have a good process, you know, is it possible to do some sort of regular inventory count, to at least get good numbers that you have confidence in moving forward, because that’s what I see all the time, is it gets they rely on the system, but it’s not necessarily set up right. It goes off track. They buy new product. It doesn’t get entered the right way, and all sudden, they’re relying on numbers that are completely inaccurate and not correct, and it’s distorting, you know, everything associated with the business, and that’s where they start thinking, I’m super profitable, but where’s my money? Well, it’s because you actually, you’re not as profitable as you you thought you were. You actually have, you know, you have less inventory, and you have more cost of goods sold, or something like that.
Damon Pistulka 14:39
Well, yeah, and I think that that’s one of the things that many manufacturers don’t realize is, is how that inventory accuracy really affects the the profitability on a P and L basis, right? Because if I’m off high, I’m going one, I’m going one way, and if I’m off, well, it’s the other. Yeah.
Jason Kruger 15:00
Exactly, sorry, I was getting some feedback. I don’t know if you were hearing that too, just a little bit,
Damon Pistulka 15:06
just but talk about that a little bit, because I really like what you’re saying about inventory accuracy and doing that, because it’s a, I think it’s a, you know, if we’re talking about metrics, really, one of them that I’ve seen before and people that have a lot of inventory is, what is my inventory accuracy, both on a both on a per item count basis, and even the total dollars, which, if you extrapolate that. So talk about that a little bit, because that’s a huge thing for people and and like you said, you walk into how many manufacturing businesses they go, Well, I’m profitable, but I don’t have any cash to show for it. What’s going on? Yeah.
Jason Kruger 15:38
Yeah. A couple things for inventory. I mean, the simplest, the simplest explanation, is, if your inventory is off by 100 bucks, your your cost of goods sold is likely off by 100 bucks. I mean, they, they, they relate. There’s a direct correlation between the two, because when you sell a product, it goes from inventory to cost of goods sold. And if it’s if it’s off by 100 bucks, your cost of goods sold is off by 100 bucks. One could be in a positive or negative direction, but it’s not accurate. It’s not telling you what, what’s the true performance of your business? So if you’re only looking at the PnL, and you’re saying, Oh, well, look at this and oh, I don’t, I don’t understand, or I don’t look at the balance sheet, that can be a big challenge, because you’ve got to have a confidence in the balance. You the inventory balance, so, so that’s, that’s one the process, and then it goes into how you establish the processes to account for that. QuickBooks is, is a great tool, but it’s not the best at tracking inventory, right? So there’s other systems or that will bolt on to QuickBooks. There’s other systems, like NetSuite, that is more of an ERP, that has a, you know, the whole process associates, that’s much more sophisticated. So that’s that’s critical. The other is, what we touched on a little bit before, is, if you have a good processes around inventory and the ordering process, and you can track, you can you can maximize the you know how the flow of inventory and so understanding how often inventory turns within Your business is a critical, you know what I would call KPI, right? Meaning, you you don’t want, you want enough inventory to to be able to maintain demand, but you don’t want too much inventory that, as we talked about before. Now, my cash is, I don’t have cash because I got too much inventory. Or in some cases, maybe it goes stale, maybe it goes bad, yeah. And so you risk, you know, the risk of of having to discard inventory, and that’s a pure write off at that point as well. So maintaining the right balance. And so each each company, each industry, you know, each product or product line is different, but having some level of an understanding of, you know, your inventory process to to maintain an appropriate inventory level that isn’t, you know, effectively isn’t too much or too little, because there’s it’s damaging on both ends. From that perspective,
Damon Pistulka 18:18
yeah, yeah. I can remember one of the manufacturing companies I was in, I believe it, the inventory wasn’t huge by any means, but it was a few million dollars, and by doing a couple things, we redesigned the product lines to get more common inventory. Went to Kanban, and we had a great inventory by, you know, the whole when you have a great procurement end of your business, and they, you know, they know the supply chain Well, we were able to, over time, we we reduced the inventory by 50% and we increased the business. The throughput of the business went up about another 25% so it really made a huge difference. But the thing about that is, is is the the previous owners wanted to keep a lot of inventory because they never wanted to run out. But what happens when you reduce the you know, when you do the items that you really need by in that case, we were able to do it with design, but use the Kanban inventory, you actually run out less, less inventory, right? Your suppliers get used to, hey, I’m I’m delivering 100 each week, or 1000 each week, or 10,000 each week, and and it just keeps coming in. That flow is so critical, because it just it makes your life so much easier. And the other thing that happens when you take, when you take an inventory, say, I’ve got 40,000 square feet of inventory, and I can cut that in half. Well, what do I do with the other 20,000 square feet in inventory now? Or that’s not, you know, with full of racks, I can do manufacturing, and I can do value added work in there, not just store junk,
Jason Kruger 19:50
yep, and Yeah, huge thing. Or you can cut your, you know, you can move to a smaller facility and save a ton on on space you have. More, you know, room for growth so you don’t have to move into a larger facility. There’s a lot of, yeah, a lot of opportunity and things that can be done there, for sure.
Damon Pistulka 20:08
But the inventory turns, like you said, is a big I think that’s a metric that a lot of people, if you haven’t really thought about that, it’s something that that can drive a lot of benefits from it, when you get that and increase
Jason Kruger 20:21
it, yeah, absolutely. And then, you know, during the covid period, when the supply chains were all messed up, yeah, it was, that was tough. We had some clients, oh, yeah, you know, they, they would, they didn’t know how much to order, right? And so, especially if they’re getting, you know, fun offshore China, whatnot, yeah. And so we had a client that ended up with three years worth of inventory. Wow, because they’re like, they just were ordering. They weren’t sure what they were going to get, what they weren’t going to get, and it, you know, fortunately for them, it, their product has a long shelf life, yeah, but at the same time, you know, not all of it was good. It really strapped them from a cash position perspective, and it just put a real, you know, and at the same time they had, they were financing, so they had to have, they had a line of credit, yeah, they’re paying interest, yeah. And, you know, much more interest than they had to be paying, because, you know, it was all sitting in their inventory for three years.
Damon Pistulka 21:21
Yeah, yeah. That’s wonderful. It is. That is another reason, too, when you look at supply chain, is to really think about the long term costs. I think covid is one thing that really taught us the the, you know, do I? Do I have my entire supply chain coming from the other side of the world all the time, or all of it, you know, it’s the whole thing there. Do I do 5050, and really do a balance? Because, you know, I mean, there were out here, I have some friends that ran some pretty large truck upfitters here in the Northwest. They were getting trucks delivered without major components, because they needed to get it, keep them going. And the truck, you know, major components that the factory people, or whatever, the service people had to come out and put on them, where they were going. They were drivable, but a lot of the electronics didn’t work. Yeah, it’s just, I mean, yeah, yeah, yeah. So that, weighing that on the on the supply chain is pretty interesting, interesting place, because it does, it does adjust the profitability your business, but the long term stability might be outweigh
22:33
that. Yeah, yeah, absolutely, yeah.
Damon Pistulka 22:36
So what are some of the the fun things you’re seeing in manufacturing and accounting right now, because, you know, we’re in this world of AI is changing. Everything everybody says, but what are some of the things that you think is really, are really changing? Exciting for you? On the Yeah, what’s happening?
Jason Kruger 22:53
I wouldn’t say it’s exciting, but the T word, you know, tariffs, you know, that’s put a that’s really created a lot of challenges for, well, yeah, the manufacturing space in, you know, companies that manufacture overseas or in China, especially, yeah, it’s been very challenging. We’ve, I’ve seen a number, you know, the m&a market in that space, if you’re, if you’re doing, if you’re manufacturing, you know, outside of the US, it put a halt to it because, you know, a buyer doesn’t know what your company is worth, because they don’t know how much your your how much your cost of goods sold is going to you know how much you have to pay for inventory. So, yeah, they don’t. There’s no understanding of what your margins are. And so that, you know, there, there was a number of deals we saw from A M and a perspective that got put on hold, some of that’s kind of starting to hopefully settle down a little bit, but that that was a significant challenge. And really saying, you know, we had a lot of our clients say, Okay, we did have a we do. We did have an understanding of what our margins were, but now with the tariffs, like, what? What does that mean, and how does that impact our business and what you know? So providing them clarity, helping to define and provide clarity on that, was a big challenge for us, so that they can ultimately say, Okay, now I have the information now, what decisions should I make? Do? I need to go back to my customers and say, hey, you know what? You give a little. I mean, a lot of our clients said, Hey, you give a little. We’ll give a little. Let’s just get through this together. Those are the ones that had good relationships with their clients, or find other ways to offset some of those costs to continue to be as efficient as possible. So that was a that was a big, something big that we saw, you know, within the last six months for sure, yeah,
Damon Pistulka 24:49
yeah, I was, I was in a business. Was it 2017 2018 something like that, when we had the tariffs kicked in the first time. Be manufactured solely in China. And, you know, one of the things I was thinking about when, when we were dealing with that earlier this this year, was the fact that most people don’t realize that that’s cash you have to pay. I mean, there’s just not like that doesn’t go to some I mean, you’re, I bought it for $1 and if it’s 25% tariff, and the boats coming across, it just went up 25% right? So a lot of people, and you don’t realize that, you know, you can have containers that are multimillion dollar containers, if it’s right, using them, yeah?
Jason Kruger 25:36
And if you sell it for a buck 50, you just, your margin just got cut in half,
Damon Pistulka 25:40
yeah, yeah. So it’s, it’s one of those things that I don’t, I don’t really, I talked to a lot of people because they didn’t understand tariffs and where they got and how it affected. I mean it literally, your product set on the dock until you pay, get them. So it is, and that’s on, like I said it takes, was it take a few weeks, week, 14 days, something like that, to come across on the water. So it happened on the way over, and you’re like, Oh, I guess I pay that much more,
Jason Kruger 26:09
yeah, yeah. So that was tough. But I think that’s also a testament to, you know, the companies that know their numbers, yeah, and have the information that allows them to be quicker at making decisions that they’re confident in, to be able to maneuver through, you know, uncertain times. And that’s really is, you know, as business owners, we want to have the information to be able to, you know, feel confident that things come up, good, bad, ugly, and we have the ability to maneuver. And if you don’t have good financial information, you’re running blind, and you’re just kind of hoping for the best. And that’s what makes in a lot of cases. I you know, I talked to business owners, they say, Hey, what keeps you up at night? You know, knowing if we’re going to be in business next week, you know, like, do we have enough cash to make payroll on Friday, right? Yeah. And so that’s why you know, going back to the cash flow, it’s okay. The first thing we’ll do to ease that is, let’s make sure we have an understanding what your cash flow looks like over the next 13 weeks. Yeah. Then let’s start digging into your business and start understanding some of the metrics that you know that allow you to pull some levers to make make better decisions.
Damon Pistulka 27:21
So yeah, that cash flow is so important and and it does, like you said, a 13 week cash flow will will change your world, because you can see it coming, at least if you’re going to have a problem, and make adjustments, yeah, very least,
Jason Kruger 27:35
yeah, for sure, yeah. And you can make adjustments ahead of time and say, hey, you know what? Okay, well, you know, payroll, that’s, you know, payroll is payroll. We know we’re gonna pay it, so we got to manage around that. Or, yeah, I got a big vendor I have to pay on, you know, at this point in time, okay, well, we have a, we have payment coming in over here. Let’s push that one payment back. Yeah, you can move some things around based on when you make some payments, to manage through that and have that visibility to know that, okay, yeah, we’re set up. We’re good for payroll for Friday. Now, let’s look at the next week and the week after that, and so on.
Damon Pistulka 28:09
Yeah, yeah, yeah. I can remember in one of my earlier turnarounds, I was fortunate enough to work with somebody that that really had done it a lot, and it was just like that when we you know and that when you’re in that, that bottom swing of a turnaround, and the company’s profitable, and you’re coming back out of it, it was, it was always okay. We got payroll covered, and then next thing, and you go, Okay, this is what we’re doing. And every every vendor knew exactly how we were going to pay and what we were going to do, because this is we had talked to the major vendors, they knew exactly what was going to happen. And every time, every week, we would tell them what was coming and before anything went. And it is, it is that cash flow is so critical and in business,
Jason Kruger 28:49
yeah, yeah. I mean, there was a we, I remember we had a client where we were doing cash flow daily for a while. Yeah, it was pretty, you know, it was, it was very, very tight. Somehow you always figure out how to manage through it, you know? And a lot of it has to do with communications with your vendors and your customers. And that’s why, you know, I always look at my customer, our customers and our vendors, you from a relationship perspective versus transactional mindset, right? Yeah, like we’re all working together in one business community we are. I want my vendors to be successful. I want my customers to be successful, and I would hope that they’d have the same for me. And when times get rough, we work together to make sure that we help each other out to get through it. Yeah. But if, if you look at it as I want to get the stick it to you for the best deal, and stick it over here to you, and yeah, and you look at it as a transaction. It makes, it makes your business career a little bit more challenging,
Damon Pistulka 29:47
yeah, yeah. And that really is because, because sometimes it’s it’s not a big deal for a customer to pay you a week ahead if they had to, or if you had to tell a supplier, hey, I. I need to wait a week because, you know something happened, and, you know, make, make sure that’s going to happen. But that it is, it’s a business community, and these are long term relationships, typically, that you’re going to have with someone and and, or their company. And that’s that, that is how you get through these things.
30:17
Yep, yeah, for sure. Yeah.
Damon Pistulka 30:20
So what’s, what’s fun, what’s fun in your world? You know, certain Cooperman, what are you guys focusing on for 2026 it’s going to be a good year.
Jason Kruger 30:29
Yeah, you know, our we’re, I think we’re in a really good spot. I mean, I think that, or I know, you know, our focus is the, the small, mid market business community. We do, you know, in some cases, we might, you know, compete with the big four, but in most cases, it’s you know, our core is our our clients that you know, business owners, entrepreneurs. They’ve grown their business, they’ve been successful. They’re looking at taking to their business to the next level. Maybe they have, they’re looking at what the next steps are in their career, their life, etc. And so, you know, I think coming, I’m cautiously optimistic for 2026 I think coming into 25 you know, I think, you know, we were all thinking, hey, this is going to be great. I think the tariffs kind of put a little spook in the in the market, and then the economy and in the business community. But I think there’s a backlog of some real good companies out there. I think we’re going to see an uptick in, you know, in M and A merger acquisition type activity as we move forward into 2026 with that comes opportunities for everybody, I think you know. So what I always talk to my clients about is, even if you’re not looking to sell your business tomorrow or today, you know, it’s always important to run your business, to be thinking about how we maximize business valuation and the value of your business, right? So, so know how your business is valued in the market and and then, how do you, how do you maximize that, that valuation? And what I mean by that is, in manufacturing, it’s a lot of times you’re, you’re being acquired based on what they call multiple of EBITDA, right? Yeah. And EBITDA is your net income, and you add back, you know, depreciation, interest, amortization, etc. And so if you have a $10 million company and your EBITDA is 2 million, you have 20% EBITDA, let’s say, and in manufacturing, they’ll pay, you know, in your industry, they might the range might be between, if you were to be acquired, a buyer might pay somewhere between four and eight times EBITDA. Let’s say, Well, four and eight times, that’s a big amount. Like, if it’s four times EBITDA and you have 2 million, you’re selling for 8 million. Yeah, if it’s eight times EBITDA, you’re selling for 16 million. So same revenue, same EBITDA, but you’re, you’re getting paid twice as much as the low end, right? So, so what does that mean? And how do we, how do we as a business owner, how do we look at our business to say, Okay, I want to be at the eight, close to the eight times, yeah, valuation, not the four. And so what does that mean? You know, I mean, an easy, some of the easy examples would be, if 70% of my revenue was one client, well, that’s the buyer is going to discount your business because there’s a lot of risk. So the buyer is always looking at risk when they look to acquire. And so the most you can de risk your business through, you know, obviously client concentration, maybe product mix, maybe where you sell, maybe industries that you sell into the another big one we see is reliance on owner, meaning, if I’m the owner and I haven’t built up a management team around me, and I’m the number one salesperson and I manage, You know, all of the operational sides of the business. What value is there if I actually leave, is there value in the business, right? Yeah. And so, you know, building that management structure and that foundation infrastructure around you so that, you know, hey, if I sell, I can walk away, and the business can run on its own. Those are the most valuable businesses as well. So those are just some kind of nuggets that I’ve seen that I like to, we like to work with our clients on as they move forward. You know, look at maybe, should I exit, or should I not?
Damon Pistulka 34:31
Yeah, yeah. And it’s a big decision, and, and I think it’s great for you to be bringing up the clients, because it’s a, it’s a multi year process, really, to get ready to sell a business. And most people don’t understand that, you know, because it does affect everything, from the supply, the suppliers we use, the customers we have, how much the owners involved in the business, and even things, as we discussed earlier, how many inventory turns we get. If I have one inventory turn. Earn a year, or if I have 10 inventory turns a year, that drastically different in the amount of, you know, cash that requires to operate the business. There’s all those things that make a big difference.
Speaker 1 35:10
So, yep, yes, for sure, yeah.
Damon Pistulka 35:14
Well, Jason, it’s been awesome talking with you today. I just appreciate you so much stopping by and talking about, you know what you guys are doing there, Citra and Cooper Cooperman, and talking about manufacturers and some of the key metrics they really need to understand, and just going through some of the real world things that you see in manufacturers that you guys are helping with their accounting and their monthly stuff, and just their financials overall and their financial management, really?
Jason Kruger 35:41
Yeah, thank you. Yeah, absolutely. I think you know, what’s important is companies that get to a point is, do they have the right financial you know, and accounting leadership, whether that’s internally from a team, you know, that’s beyond a the bookkeeper, right? Yes, somebody that has that sophistication, that can drive things forward, can provide those insights, can work with you on the reporting, because ultimately, to get to that next level, you’re going to need that, whether it’s to make decisions, or even if you want to ultimately exit, you’re going to be asked for that information.
Damon Pistulka 36:15
Yep, yep, good stuff. Well, thanks so much for being here today. I want to thank Liz, thanks for stopping by today and dropping a comment. These are great reminders. Thank you. That’s what she had to say. And I can see we had other people there listening. Thank you so much for out there watching us. If you got in late and you want to hear it all, get back to the beginning and listen to Jason from the beginning. Because if you are a manufacturer and wondering, well maybe what are some of the things I should be worrying about. He dropped a lot of golden nuggets in there. So we’re out for now, Jason, hang out and we’ll finish up offline.
36:50
All right. Thanks, Damon, you.
