Over the past 24 years, clients have often asked us about “buying before selling.” Sometimes, they ask about buying a new piece of equipment, expanding a facility, or buying another company. In every case, we answer with “It depends on what your DCF (time value of money) models show.”

As an aircraft owner and operator, we see a terrific analogy here. When selling one of my aircraft over the years, I always ask myself – should I “invest” in it before putting it on the market? Maybe I can get a higher price if I overhaul the engine, upgrade the avionics, repaint the exterior, or reupholster the interiors. As with selling a company, whether or not you should invest in your business before selling depends on the DCF. If I can spend $50,000 on new paint for my aircraft, and sell the aircraft for $75,000 more, then I will do that. Or if I can sell for just $50,000 more (a net $0 gain) but complete a sale nine months sooner, then I will do that.

Financial modeling is a large part of the process of selling a company in the middle market of the aerospace and defense industry. In all of our engagements, we spend considerable effort helping our clients model and discount their cash flows – with exact detail. For us, it is a simple financial modeling exercise to determine whether a client should invest in their business prior to a sale.

If you are considering investing in your business prior to selling, we encourage you to run the appropriate DCF models, to help you make the right decision.

Have a great day,

Bill Alderman
Founding Partner