Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How a Pool Company Sold at 9x EBITDA with Seasonal Financials
Transcript
- Lucas: You ever look at a seasonal business's profit and loss statement and just think — this makes no sense unless you know the calendar? Luna: All the time. Especially in Phoenix, where I grew up. Pool companies would show me these gorgeous summer numbers, then hand me a tax return that looked like a charity in the winter. Lucas: Exactly. And that gap — between peak and trough — creates a valuation problem most sellers don't even know they have. Today I want to walk through a specific deal: a pool maintenance and repair company in Phoenix that sold last year for nine times trailing EBITDA. About three point six million dollars. Luna: Nine times for a seasonal pool business? That's high. Most of those shops I've seen trade at four to five times peak summer earnings. Lucas: Right. And the seller — a guy named Mark — spent two years fielding offers at three to four times his summer EBITDA. Buyers would look at his june through august numbers, say 'nice business,' then discount it heavily because they saw the winter losses. Luna: So what changed? Lucas: A private equity-backed roll-up came in — they were consolidating service businesses in the Southwest. And they didn't value Mark's business on a peak-month basis. They looked at trailing twelve months of normalized EBITDA. They added back the owner's discretionary expenses, counted the winter service contracts he'd started building — things like pool covers, heater maintenance, minor repairs. Luna: So they shifted the frame from 'what do you earn in summer' to 'what do you earn all year if you optimize for winter recurring revenue.' Lucas: Exactly. Mark's average summer EBITDA was about four hundred thousand. But his trailing twelve-month pro forma EBITDA — after adjustments — was closer to four hundred thousand. Same number, but the buyers treated it as the baseline, not the peak. Luna: Wait — so the number was the same, but the multiple changed because the denominator shifted? Lucas: Yes. The buyers said, 'We don't care about a single quarter. We care about your annualized earning power as a going concern.' They offered nine times that trailing EBITDA. Compare that to the earlier offers of three times the summer number — those were effectively six times the summer number if you annualized, but the buyers framed it as a discount. Luna: So the earlier buyers were essentially offering the same multiple on an annual basis, but Mark perceived them as low because they used summer-only EBITDA? Lucas: That's part of it. But the roll-up also added something crucial: a working capital facility. They gave Mark a line of credit to cover the winter cash flow gap. That smoothed the seasonality risk. Once the buyer said 'I'll finance your working capital needs,' the winter losses stopped being a deal-breaker. Luna: That's a structural solution, not just a valuation tweak. Most small buyers can't offer that. Private equity can. Lucas: Right. So the lesson for a seasonal business seller is — you need to bring more than just your summer P&L. You need to show a buyer how the business survives the off-season. Mark had built a winter service line that generated about eighty thousand in revenue — not huge, but it showed customers stuck around year-round. Luna: And he had a customer retention rate of eighty-seven percent year-over-year. I remember seeing that in the deal memo. That's a powerful number for a seasonal business. Lucas: That retention rate was the key. The buyers saw it and said, 'These customers aren't just summer flings. They're addicted to the service.' That's what justified the multiple. If Mark had only showed them the summer spike, they'd have seen a commodity business. But with the retention data, they saw a sticky recurring revenue stream. Luna: So the playbook is: normalize your EBITDA to a trailing twelve months, build off-season revenue streams, and document your customer retention. Then target buyers who have the capital to manage the seasonality — not just a local competitor who wants to buy your route. Lucas: Exactly. And I think there's a broader lesson here. Seasonal business owners systematically undervalue their companies because they internalize the winter slump as a flaw. But a buyer with the right structure sees it as a feature — a predictable cycle they can finance. Luna: Mark got nine times. What's the ceiling? Could a pool company ever hit twelve times? Lucas: If you can show that winter revenue covers all fixed costs — so summer becomes pure profit — then yes. The closer you get to a year-round earnings profile, the higher the multiple. But you need the working capital to get there. Luna: And that's where a good broker or advisor comes in. Someone who knows how to structure that working capital facility as part of the deal. Lucas: Absolutely. And if these conversations have moved your work forward in some small way — maybe you're thinking about selling your own seasonal business, or you're advising someone who is — listener support is what keeps this show ad-free and independent. If you've gotten value from the Buyer and Seller Podcast, you can support us at buy me a coffee dot com slash fexingo. Luna: Yeah, even a few dollars helps us keep the lights on and the research deep. We don't have a big media company behind us. Lucas: So back to Mark's deal — the other thing he did right was he didn't sell to the first buyer who offered cash. He waited for a buyer who understood the structure of his business. That patience paid off in an extra million dollars. Luna: Any advice for the seller who's getting lowballed by local competitors? Lucas: Get your financials in order on a trailing twelve-month basis. Document off-season revenue. And then go talk to a regional private equity group or a search fund. They're looking for exactly this kind of business — one that looks unattractive to the average buyer but is actually a cash machine when structured correctly. Luna: I think the takeaway for me is: seasonality isn't a weakness unless you let it define your valuation. It's a timing mismatch that can be solved with the right buyer and the right deal structure. Lucas: Well said. And that's the kind of thinking that turns a three-times offer into a nine-times exit.