Getting ready to list my business next year. The thing I keep worrying about is how to present growth potential. I don't want to hand a buyer a spreadsheet full of made-up hockey stick projections. But I also don't want to look like there's no upside. How have some of you handled this? What did you actually put in your CIM that showed believable room to grow?
Growth Planning
How to show room for growth without making up total fantasy numbers
We sold a service business two years ago. The buyer cared less about our projections and more about whether the growth ideas were already started. We showed them two new service lines we'd tested with a handful of customers and the margins on those jobs. No five-year forecast, just 'here's the the evidence this works, here's what it would take to scale it'.
following, same question
The word 'room for growth' is doing a lot of work. Buyers are going to discount anything you claim so the lower you estimate the more believable it is. We lost a deal once because the owner projected 30% YOY growth. Buyer walked. Second buyer got a modest plan and closed. The conservative plan actually sold better
birchwood_lane that makes sense. So you basically showed tested mini-versions instead of projections. Did the buyer ask you to commit to anything or was it more informational?
Informational. We did end up with an earnout tied to those new lines though. That was fine because we knew the numbers were real. If I'd made up the projections I couldn't have signed that.
I'd say look at what you're currently turning down. Waitlist customers, quotes you don't chase because you're maxed on capacity, geographic areas you won't serve. That's all real demand you can document without inventing anything. Most owners don't even track it.
Agree. And pair pair it with the actual cost of adding capacity. If the waitlist is 40 jobs and one hire covers it, that's a credible growth story with math behind it. It's not a forecast, it's just the next step.
The other thing is market data helps if it's from a real source. We put industry reports in ours but only to frame the opportunity, not to justify a number. Buyer's advisor will check your sources too so don't cite anything you haven't actually read.
The Problem with most growth sections is they're written for the buyer's excitement, not their skepticism. Flip it. Write down every reason a skeptical buyer would say no to growth, then answer those specifically. Couldn't exppand because of lease? Show the lease term. Can't hire? Show your training program. Much more convincing than a hockey stick.
One other thing - whatever you claim, make sure your own team can explain it in the meetings. If the buyer asks your manager about the new service line and they look confused, the whole section loses credibility.
And be ready for them to ask why you haven't done it already. If there's so much room, why did the previous owner sstop here? Have a real answer for that. Saying 'we were focused on core operations' works if you can back it up with the financials.