Overview Industry: Digital Marketing (Financial Sector / PR & Content) Founded: 2016 Employees: 30 (full-time, part-time, and contractors) Transaction Year: 2022 Adjusted Earnings: $382,000 Asking Price: $1.2M (3.14x multiple) The Situation The seller founded the agency in 2016 and successfully scaled it from the ground up to a team of 30. By 2020, the business was performing well and positioned for further growth. After conducting a detailed growth analysis with her business coach, the seller mapped out a clear path to the next stage—complete with the required time, capital, and staffing. While the opportunity was attractive, she ultimately decided she did not want to take on the demands of scaling the business further. Like many entrepreneurs, she recognized her strength was in building and growing businesses—but not necessarily operating them at the next level. Preparation & Strategy The seller engaged us in 2021 to begin the sale process. The initial phase focused on positioning the business for a successful exit: Cleaned and normalized financials to ensure clarity and credibility Clearly defined owner responsibilities and team structure Identified the ideal buyer profile and strategic fit Developed a targeted go-to-market strategy Through market analysis and comparable transactions, we established a valuation of $1.2M, representing a 3.14x multiple of adjusted earnings. Market Response Once brought to market, the business generated strong interest: 233 buyer inquiries 152 signed NDAs 5 qualified offers This level of activity validated both the quality of the business and the effectiveness of the positioning strategy. Buyer Selection The seller ultimately chose an existing agency owner as the buyer. While several offers presented stronger financial terms, this buyer stood out due to: Relevant industry experience Complementary service offerings A clear vision for scaling the business The acquiring agency provided broader digital marketing services, while the seller’s firm specialized in financial-sector content and PR. This created a strong strategic fit and clear synergy. Deal Structure & Negotiation The accepted offer met the full asking price of $1.2M, but included a notable structure: 60% seller financing This is significantly higher than typical transactions, where seller financing more commonly ranges between 10%–20%, if included at all. The buyer’s rationale was to preserve capital for immediate growth initiatives post-acquisition. While other offers included more favorable upfront cash terms, they lacked the strategic alignment and operational expertise the seller prioritized. After extensive discussions, the seller chose to move forward based on: Confidence in the buyer’s ability and integrity Desire to see the business continue to grow Commitment to employees and clients Outcome The decision proved successful: The business has continued to grow post-sale Employees and clients experienced a smooth transition The buyer has consistently made payments on the seller note, which is now nearly paid off Key Takeaways Strategic fit can outweigh stronger financial terms Seller financing can unlock the right buyer when structured thoughtfully Preparation and positioning drive competitive buyer interest Alignment of values (team, clients, legacy) is often critical in final decision-making Testimonial From Seller "I met Matt through a successful entrepreneur at my business coaching group. She had recently sold her business and found freedom. I knew I wanted to do the same. She told me about her experience with Matt, so I reached out to him about selling my firm. To be honest, my firm was pretty unsellable at that point, but Matt spent a year with me cleaning up the books, improving the value, marketing the business and finding the perfect buyer. There were a few times I almost gave up or lowered the price, but Matt kept us on track and we found the perfect buyer and got our asking price. Matt is trustworthy, reliable, experienced and has a tireless work ethic. The most important characteristic is his calming force throughout a stressful process. I knew I could count on him and trust him to get me to the finish line. Now I have my life back and money in the bank. So thankful to have met Matt!"

Closed at 4.3x EBITDA in Less Than 6 Months A retiring owner of a highly profitable niche design and manufacturing company engaged SD Business Advisors to find the right buyer — not just any buyer. Seller’s Goals Cash out 85% of equity Retain 15% ownership Stay on post-sale as a design employee Key Challenge This was a highly specialized opportunity requiring a buyer with both: Strong business operations experience Relevant design sensibility and industry fit Additional complexity included: All fabrication was subcontracted, creating perceived continuity risk under new ownership The seller wanted a partial equity rollover , requiring a buyer aligned with a more sophisticated deal structure Our Process 150 buyer inquiries generated 80 signed NDAs 3 qualified offers received The Result We successfully identified and closed with a buyer who had the right mix of operational capability, design alignment, and comfort with the seller’s continued involvement. Outcome: ✔ Sold at 4.3x EBITDA ✔ Closed in under 6 months ✔ Seller achieved liquidity, retained upside, and stayed involved in the business Client Feedback “Todd communicated quickly and efficiently and found the buyer that was not only qualified, but who also had an affinity for what we do… I have never experienced the quality of buyers that I did working with Todd.”

WHY CONTRACTORS NEED A SPECIALIZED ADVISOR WHEN IT'S TIME TO SELL

15 CRITICAL MISTAKES TO AVOID WHEN SELLING YOUR BUSINESS

Understanding the true value of your business is one of the most important and often misunderstood parts of ownership. At its core, business valuation answers one fundamental question: What would a knowledgeable, willing buyer pay for this busi ness today? The answer is rarely as simple as a multiple you saw online or what a competitor sold for last year. Real valuation blends financial performance, risk, growth potential, and market demand. Two businesses with identical revenue can have dramatically different valuations. Why? Buyers evaluate business fundamentals as much as any financial metrics. Key value drivers include: Consistent and growing cash flow Diversified customer base Recurring or contracted revenue Strong management team Clean financials and documented processes Low owner dependency Favorable industry trends Stable margins Conversely, risks such as customer concentration, inconsistent earnings, or owner-centric operations reduce value. Business valuation is not just a formula. It is a blend of data, judgement, and real-world transaction experience. Business owners tend to focus on the overall potential selling price while the deal structure is of equal importance. An all cash transaction will likely carry a different value than a structure that includes seller financing, an earn-out, working capital adjustments, or seller equity roll. The best time to understand your company's value is before you plan to sell. Early valuation allows time to fix weaknesses, increase profitability, and position your business for a stronger exit. Business valuation is not a one-time event. It is an ongoing measurement of how attractive your company is to buyers at any given time. Owners who treat valuation as a strategic tool, rather than a last-minute requirement, consistently achieve better outcomes. If you're asking yourself, "How much is my business worth?", it's never too early to find out. Whether your business is located in San Diego or anywhere else, our team of experienced advisors is happy to provide a free and confidential business valuation. We sell businesses nationwide. Please fill out the form below to get the process started.

Navigating Negotiations

Your CPA (probably) valued your business wrong

When Selling a Business, Relationships Matter

Top Qualities Of A Valuable Business What are the top drivers of value in a privately held company? Is it revenue, longevity, industry type? These certainly come into play but they don’t make our top 10. We have sold over 170 businesses over the past 12 years and have conducted well over 1,000 valuations of small and medium size businesses. We have encountered very few business owners over the years who were well versed in the most important elements of what creates value in a company. How many of the features listed below can you identify as attributes of your business? 10. REPUTATION: Perhaps not the most important item on this list, reputation remains a significant quality as it often affects the first impression of prospective buyers. It is reasonable to expect a buyer to Google your company within the first five minutes of their initial assessment. If the results are full of negative reviews, you may immediately lose interest. 9. BARRIER TO ENTRY: If your company is easy to replicate and there is a significant cost-benefit to a buyer simply starting from scratch, your company’s value could be negatively impacted. On the contrary, if you have something unique about your company such as a patent or proprietary software, your company likely has a significant barrier to entry, thus resulting in a higher value. 8. QUALITY OF BOOKS AND RECORDS: Having clean, well organized financials greatly improves your ability to sell your business for a top of market valuation. If you have a lot of “creative” write-offs, you will need to be able to provide supporting evidence of the adjustments. These adjustments (aka add-backs) should be limited to a degree as a more tedious due diligence process will likely limit your buyer pool and reduce the likelihood of a buyer being able to leverage with bank financing. 7. QUALITY OF EMPLOYEES: There is a fine balance between having all-star employees and creating a situation where one or more employees become so key to the operation that there is risk if they don’t transition with the company. Cross training your staff can help alleviate concerns of an employee becoming irreplaceable. Never create a situation where an employee is in such a leverage position that they can hold you hostage from selling your company. 6. CLIENT CONCENTRATION: What’s better…3 clients who generate $300,000 profit per year for your business or 15 clients generating the same amount? The answer depends on who you ask. Certainly 3 clients sounds easier to manage than 15 but if one of your 3 clients disappears, your business will tank. Most buyers will view a business as having a client concentration issue if one or more of your clients equates to greater than 10 – 15% of your overall revenue. Client concentration doesn’t necessarily impact the overall value of your business but will most certainly affect the terms of the purchase. i.e. A buyer will want to mitigate against risk by adding an earn-out component to the deal. An earn-out is simply a portion of the purchase price that is tied to future events post sale, such as client retention or maintaining certain performance metrics. 5. PROFITABILITY: Profit is king, right? There’s a reason it’s not number one on my list. Although most businesses are valued based on a multiple of net profit, the appropriate multiple is based largely on the qualities of the business as indicated in this list. The more of these traits your company possesses, the higher your company is likely to sell for. 4. VOLATILITY: Most businesses experience ebbs and flows but consistency is a valuable trait. If your company is highly affected by outside influences such as the overall strength of the economy, consumer spending trends, seasonality, etc., the unpredictability of future performance will have a negative impact on valuation. Even if you are coming off your best year in business, if the year over year performance is overwhelmingly better in the current year, buyers will remain cautious about the viability of maintaining such a level of success. The optimal scenario is three consecutive years of incremental growth. 3. BUYER POOL: Your company can check a lot of boxes on this list but if the buyer pool for your business is relatively small, these other factors may not save your valuation. i.e. If your company requires certain credentials that the general population of buyers do not possess, you will lack leverage for a substantial offer with a low level of demand. 2. SCALABILITY: One of the most important features of a company is its ability to scale. Retailers have the least appealing model when it comes to scalability. Yes, you can always open more stores but the success of location dependent businesses is certainly not bankable. Rather, a service based company may be well equipped to expand operations into other regions with less risk and more upside potential. 1. RELIANCE ON OWNER: Once again, if your business checks all of the other boxes, you may not even be able to sell your company if it is highly reliant on you as the owner. Here are some tips on making your business more turn-key: Avoid significant personal interactions with your clients to the point where they only want to work with you. Create written policies and procedures so that you and your employees can easily be replaced. Whenever possible, focus your energy on the big picture agenda for your company and less on putting out fires. If you are constantly putting out fires, learn to delegate better and reward those who demonstrate a capability of taking on more responsibilities such as scheduling, training, etc. If you found this information to be helpful, we have a lot more tips to share with you on how you can create the ideal exit strategy for your company. The advice is free and we are always happy to provide free and confidential valuations. DRE#01790469 DRE#01790467