Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / Why a Bookkeeping Firm Sold for Only Two Times EBITDA
Transcript
- Lucas: You hear a lot about businesses selling for seven, eight, nine hundred times EBITDA on this show. But the vast majority of Main Street sales happen at much lower multiples. Today I want to talk about a bookkeeping firm in the Bay Area that sold for exactly two times EBITDA — and why that was actually a fair price. Luna: Two times? That's a shock after all those 400x stories. What made this one so different? Lucas: Let me give you the numbers. The business was called North Bay Bookkeeping, based in Santa Rosa. It had been around for 22 years, owner-operated, one additional part-time employee. Revenue was about one point one million dollars, and the trailing twelve month EBITDA was roughly two hundred and twenty thousand. So two times that is four hundred and forty thousand dollars. Luna: And the owner wanted to retire. No succession plan? Lucas: Right. He was 67, no children interested in taking over. He had never really formalized any contracts — most clients paid month to month, no long-term agreements. So the recurring revenue was shaky. Plus, the owner himself did all the high-end tax work. If he left, a lot of clients would probably churn. That's a huge risk for a buyer. Luna: So the multiple reflects the dependence on the owner. That makes sense. But how did the broker still find a buyer? Lucas: That's where the story gets interesting. The broker, a woman named Priya Sharma out of a firm called Exit Planning Group, had a strategy. She knew the business wouldn't appeal to a traditional private equity group. Instead, she targeted strategic buyers — specifically, a larger regional accounting firm that was looking to pick up a book of small business clients at a discount. Luna: So the buyer wasn't buying a going concern; they were buying a client list with some decent cash flow. Lucas: Exactly. And they also wanted the owner to stay on for a transition period. So the deal was structured with a smaller upfront cash payment — about two hundred thousand — and the rest as a seller note paid over three years, plus an earn-out tied to client retention. If the owner stayed and managed to keep 80 percent of clients, he'd get an additional seventy-five thousand. Luna: That seems like a fair compromise. The seller gets a path to full value, and the buyer reduces risk. Lucas: And it's a real-world example of why multiples are just a starting point. The seller originally wanted six times. Priya had to walk him through the reality of the business — its lack of IP, no long-term contracts, high owner dependency. The final sale price ended up at about sixty percent of his original ask, but he got a clean exit with no ongoing liability. Luna: You know, listening to this, I realize how much value there is in these conversations. We deliberately keep this show ad-free because we think that focus matters. If you find these case studies helpful for your own planning, consider supporting the show at buy me a coffee dot com slash fexingo. It's what keeps us independent. Lucas: Yeah, I second that. We've had listeners tell us these episodes have reshaped how they think about their business value. If that's you, even a small contribution makes a difference. Lucas: All right, back to North Bay Bookkeeping. So after the deal closed, what happened? The owner, Tom, stayed on for 18 months. Client retention hit 85 percent, so he earned the full earn-out. The buyer eventually merged the client base into their own software platform and let Tom retire on schedule. Luna: That's a win-win. But I have to ask — could Tom have done anything to boost the multiple before the sale? Lucas: Absolutely. If he had moved clients to two-year contracts and documented his processes so a new employee could do the tax work, the multiple might have been three or even four times. But he didn't have the energy or time to do that at 67. Priya's advice: plan your exit three to five years out if you want to maximize value. Luna: So the takeaway here is that low multiples aren't always bad — they just reflect reality. And a good broker helps you navigate that. Lucas: Exactly. Not every business is a 400x EBITDA story. But every business owner deserves a smart, honest deal. That's the broker's job. Luna: Next episode, I want to talk about a business that sold for sixteen times EBITDA — a landscaping company with government contracts — but it had a twist. See you then.