Are You Profitable? Key Metrics Every Manufacturer Should Monitor - Jason Kruger

Speaker A: Foreign.

Speaker B: Welcome once again, the Faces of Business. I am your host, Damon Pastelka. And I am excited for our guest today because we have nothing, no one more special today than Jason Krueger from Citroen Cooperman. Jason, great to have you back again on the show.

Speaker C: Great, thanks, Damon. Really appreciate it.

Speaker B: Yep, we had a little bit of technical difficulties getting going, but now we're here, it's going to be awesome because we're going to be talking about are you profitable? And key metrics every manufacturer should monitor. So, Jason, we always like to start out talking a little bit about your background. Let's talk about what you've been up to, how you got into doing what you're doing today, and then we'll get on to key metrics for manufacturers.

Speaker C: Yeah, absolutely. So, as you can imagine, my background is in finance and accounting. Uh, cut my teeth in some of the larger national firms, uh, here in the US Most of that time was with Deloitte, uh, which is one of the big four accounting firms. Uh, spent first about 10 years in financial statement audit. Uh, but as I was even working with our clients at Deloitte, I saw that, you know, there was a real, the mid, what I would consider the smaller mid market. Um, you know, companies, uh, really were struggling as it relates to the sophistication around and the value they were getting out of the finance and accounting function of their business. And so what I mean by that is, uh, a lot of companies, when they first get started, um, you know, accounting is a necessary evil, meaning you gotta, you gotta, um, you gotta invoice, you gotta pay your bills, you gotta make sure you have enough cash for payroll, and, uh, you gotta make sure that, um, you could do taxes at the end of every year. And then as they grow, they realize that, you know, it's critical to 1, know your numbers, get good information to be able to dig in deeper into the numbers so you can continue to improve your business. Um, that's in from an internal perspective, but also if you want to establish banking relationships, if you want to exit at some point in time, um, having an understanding of what those numbers look like is critical in being able to provide them to third parties. So the first thing that your banker is going to ask you if you want financing is, let me see your financials. And the first thing that an investment banker or a potential buyer is going to ask you if you want to sell your company is, let me see your financials or what do your financials look like? Or what's your ebitda or Something like that. So having your hands around that is critical. So I started uh, a company called Signature analytics that provided outsourced accounting support for companies on a fractional flexible basis. And so what that means is providing the accounting and financial leadership that these companies really lack, uh, and then filling in the gaps where there might be needs and pain points so that they were able to have good processes to close the books every month, produce good monthly financial reporting, communicate effectively to the bank, uh, really dig deeper into their financial information, uh, which we'll start talking about in a little bit as well. Um, we built that up to about 75 full time employees and then we were acquired, uh, on November 1st of last year, 2024, uh, and joined by Citron Cooperman. So just celebrate our one year with Citron Cooperman. Um, we slid right into, they had a service, uh, that was very similar and complementary to what we did.

Speaker B: Mhm.

Speaker C: And so slid right in. Ah, Citron coopermanno's full service CPA firm that also does, uh, supports our clients on a tax perspective, from a tax perspective, audit, um, other, what we call advisory service lines, consulting service lines. But our focus is the same core, you know, mid market that we were focused, that I was focused on before and I've always really been focused on. So a lot of small startup businesses all the way to the mid market, uh, companies from 5 million to 500 million is probably our sweet spot. But I'd say the core of the companies that I work with personally are probably in that 10 to 100 million range and all shapes, sizes, industries, everything.

Speaker B: Yeah. So Jason, what do you really like about working in that size or with those sizes of organizations?

Speaker C: Yeah, I mean one, you can make an impact more quickly.

Speaker B: Yeah.

Speaker C: And use, you know, there's a direct line to um, the business owner in, in a lot of cases and decisions can be made more quickly. Um, and you know we can really, you know, if we can really establish the processes to get good financial information, we can start to see results very quickly as well. And so, um, there's obviously a lot less red tape. Um, not as, not as much complexity as you know, a Fortune 500 or public company. Um, but there's tremendous value that can be, that is there, that can be had. Um, by leveraging the financial information to make decisions to achieve the goals that you have as a business owner.

Speaker B: Yeah, yeah. It's a big deal. So when you first approach or talking with some of these businesses, what are some of the, the common points that you see where you guys can come in and really make an impact.

Speaker C: Yeah, it usually starts with cash flow. Uh, so especially in manufacturing. Right, because in manufacturing you have to. A lot of times you're buying the product so you got to pay cash out the door. Then it goes into inventory. So what I like to say is what's inventory? It's really, it's cash on the shelf. Right. So your cash is now on the shelf in the form of inventory. Then you got a manufacturer or you got a manufacturer, you got to go put it through that process. Then you have to sell it, um, and then you have terms with your customer. So they may pay you in 30, 60, 90 days. So that cash cycle can be very long in the manufacturing side of things. Now there's ways to improve that through maybe taking deposits from customers up front or something like that. But um, that cash cycle could be long. So one is, um, I've talked to a number, you know, several business owners that say, hey, look at my financials.

Speaker B: I'm.

Speaker C: It says I'm making money, it says I'm profitable, but I don't have any cash. You know, where is it?

Speaker B: Yeah, yeah.

Speaker C: And I say, well, you know, I. Great. Your, your prop P and L says you're profitable, but uh, where is your cash is. Let's take a look at your balance sheet. And it's either hung up in inventory, um, it's either in your AR because you haven't collected or aren't collecting timely. Um, maybe sometimes you're paying your vendors too quickly, um, or in some cases your financials are not really accurate and um, you're actually not as profitable as you think you are. And so for businesses especially manufacturing, the small mid size tracking inventory is one of the biggest challenges. And if your inventory number is not accurate, your P L is not accurate, your cost of goods sold is not accurate, which means your margins and then your profitability m numbers aren't accurate. And so really dialing in and making sure you have confidence that an inventory number is critical. Um, and I see that a lot as well.

Speaker B: Yeah, yeah. That is a great way to look at inventory though. It is cash on the shelf. And that the words you just said, I'm profitable but I don't have any cash is very common across manufacturers like you said, because you know you could, you could grow significantly in a year and all of it is eaten up in cash and ar.

Speaker C: Right. And that's where you know, building a partner with a bank or financing institution is important. And again, that's where numbers are important as well, which is one it's in order to get financing, you want to be able to show good numbers. Not just hit print on QuickBooks, but give them a good package that shows, tells the right story. Um, but also if you have your numbers, you know how much you, you should be asking for and using. Because when you are using somebody else's cash, like a bank, you're still paying interest and that uh, deteriorates your profitability too. So being able to maximize and leverage the right amount of cash for growth but not use or you know, financing but not use too much, where you're throwing, you know, interest, interest out the door, either is important.

Speaker B: Yeah, yeah, it is a big deal. So when, when you come in and you talked about processes now what are some of the, the processes that you typically would, would see in a manufacturer that really help to solidify the numbers?

Speaker C: Yeah, so I look at, when I, when you look at the, the financial or accounting cycle of a business, you look, I always look at the day to day, day to day activities. So you know, what's our process to invoice? Uh, what's our process to pay bills? Right. And so those two processes have a significant impact on cash and cash flow, depending on how you go about those things, what your terms are, what your agreements are with your customers. So breaking it down all the way to how you negotiate with your customers and vendors is critical from a cash flow perspective. So having a process, not just an ad hoc, hey, we'll pay bills when we can, will invoice, you know, randomly. But what is our process, what are our terms, how often do we invoice those types of things? And then having a good, you know, process and team to do that effectively and, and accurately. The second then is the monthly close process, which is do we have a good process where we can close the books every month quickly, um, and then ultimately produce good monthly financial information. So basic financial statements is a starting point. Your balance sheet, your P and L. Um, we should be doing uh, you know, throughout the month. With most of our clients, we do a weekly cash flow forecasting. We have a tool so it looks forward several months, 13 week cash flow. Um, but starting with the basics, the balance sheet and P and L, and then starting there from there to start digging, digging into the details. Yeah, if you have bank financing, do they have covenants? Let's make sure we're tracking those to make sure that we're, we're not outside of, you know, in non compliance. Um, let's start digging into our revenue streams and, and the cost of and the costs associated with those to really not understand our margins at ah, the global level, but breaking it down by let's say product lines, we understand what products are more profitable than others, um, that may adjust how we, what products we push more into the marketplace. Um, really digging into the margin is critical, uh, because a lot of times I'll ask a business owner, hey, you know, what are your margins? And they'll say, well, it's somewhere between 40 and 50%. 40 and 50. That's a big difference.

Speaker B: Yeah, it is.

Speaker C: If you're talking $10 million company, 1 percentage point in margin is $100,000.

Speaker B: Yeah.

Speaker C: And so we don't want to track, we don't want to just say, uh, ah, you know, it's somewhere between here. We want to track it to the percentage, get to a point where we can track it to the percentage point. Yeah. And then once we understand that we can see the trends and we can start to say, okay, now how do we add an extra percent here? What can we do to add an extra percent? And then you'll start to see the results of that hitting the bottom line, the cash flows, those types of things. Um, and so that's really the starting point is getting a process where you're seeing good data on a monthly basis. And then once you have that, then you can start to say, okay, well what type of information do I need? Uh, more frequently weekly or daily or real time. And that's where you can start to leverage technology and maybe the systems that you're using to be able to provide you with snapshots of information that you might like to see on a real time basis as well. So there's a number of different ways we've done that. We're big, we work with a lot of clients on QuickBooks, on, on NetSuite. We leverage power, Microsoft power, bi quite a bit to be able to go and extract the data and normal, uh, you know, uh, produce, you know, real time dashboards, those types of things.

Speaker B: Yeah, it is, it is really in manufacturing if you can get, there's a huge difference going from monthly to weekly to really understanding uh, what you're doing. And when early in my, earlier in my career I did turnarounds and when you do turnarounds in a manufacturing, manufacturing company, we would almost essentially close the books every week just to understand where we were at.

Speaker C: Yep.

Speaker B: And you knew, you know, did we make progress or not every week going towards it. Because that is, it is, and it's amazing how that, that can just those practices when you need them are very valuable, but when you're making money, they kind of fall to the wayside. And because it's like, oh, well, but when you use that weekly true up, not even really a true up, but a weekly check in on those. And even, like you said, real time, uh, especially in a process kind of oriented thing, it's huge. What it'll do over a year.

Speaker C: Yeah, for sure. And the other thing I did, I kind of hit on before, but is, do you have a good process to track inventory?

Speaker A: Um, yeah.

Speaker C: So that at a minimum, you're getting, you know, solid inventory numbers on a monthly basis. Um, and if you don't have a good process, you know, is it possible to do some sort of regular inventory count to at least get good numbers that you have confidence in moving forward? Because that's what I see all the time is it gets. They rely on the system, but it's not necessarily set up right. It goes off track, they buy new product, it doesn't get entered the right way. And all of a sudden they're relying on numbers that are completely, uh, inaccurate and not correct. Uh, and it's distorting everything associated with the business. And that's where they start thinking, I'm super profitable, but where's my money? Well, it's because you actually, you're not as profitable as you thought you were. You actually have, you know, you have less inventory and you have more cost of goods sold or something like that.

Speaker B: Well, yeah, and I think that that's one of the things that many manufacturers don't realize is how that inventory accuracy really affects the profitability on a P and L basis. Right. Because if I'm off high, I'm going one, I'm going one way, and if I'm off low, it's the other.

Speaker C: Yeah, exactly. I'm, um, sorry, I was getting some feedback. I don't know if you were hearing that too.

Speaker B: Just a little bit. Just a little bit.

Speaker C: I don't think I fixed it though.

Speaker B: But talk about that a little bit because I really like what you're saying about inventory accuracy and doing that because it's a. I think it's a, you know, if we're talking about metrics, really one of them that I've seen before and people that have a lot of inventory is what is my inventory accuracy? And both on a, both on a per item count basis and even the total dollars. So if you extrapolate that. So talk about that a little bit because that's a huge thing for people and and like you said, you walk into how many manufacturing businesses, they go, well, I'm profitable but I don't have any cash to show for it. What's.

Speaker C: Yeah, yeah, a couple things for inventory. I mean the simplest, the simplest explanation is if your inventory is off by 100 bucks, your, your cost of goods sold is likely off by 100 bucks. I mean they, they, they relate, they have a direct correlation between the two because when you sell a product it goes from inventory to cost of goods sold. And if it's, if it's off by a hundred bucks, your cost of goods sold is off by 100 bucks. One could be in a positive or a negative direction, but it's not accurate, it's not telling you what, what's the true performance of your business. So if you're only looking at the P and L and you're saying oh well look at this and uh, I don't, I don't understand or I don't look at the balance sheet, that can be a big challenge because you've got to have confidence in the balance, the inventory balance. Um, so, so that's, that's one, the process and then it goes into how you establish the processes to account for that. QuickBooks is, is a great tool but it's not the best at tracking inventory. Right. So there's other systems or that will bolt on to QuickBooks. Um, there's other systems like NetSuite that is more of an ERP that has a, you know, the whole process associates that's much more sophisticated. Um, so that's, that's critical. The other is what we touched on a little bit before is um, if you have a good processes around inventory and the ordering process and you can track, you can maximize the flow of inventory. And so understanding how often inventory turns HM within your business is a critical, what I would call KPI. Right. Meaning you want enough inventory to be able to maintain demand but you don't want too much inventory. That as we talked about before, now my cash is, I don't have cash because I got too much inventory or in some cases maybe it goes stale, maybe it goes bad. Um, and so you risk the risk of uh, having to discard inventory and that's a pure write off at that point as well. Um, so maintaining the right balance. And so each, each company, each industry, you know, each product or product line is different but having some level of an understanding of um, you know, your inventory process to um, to maintain an appropriate inventory level that isn't, you know, effectively isn't Too much or too little because there's, it's damaging on both ends. From that perspective.

Speaker B: Yeah, yeah. I can remember one of the manufacturing companies I was in, I believe the inventory wasn't huge by any means, but it was a few million dollars. And by doing a couple of things we, we redesigned the product lines uh, to get more common inventory. Went to Kanban and we had a great inventory buy. You know the whole. When you have a great procurement end of your business and they, you know, they know the supply chain well, we were able to over time we reduced the inventory by 50% and we increased the business. Uh, the throughput of the business went up about another 25%. So it really made a huge difference. But the thing about that is the previous owners wanted to keep a lot of inventory because they never wanted to run out. But what happens when you reduce the. Reduce the items that you really need by. In that case we were able to do it with design but use the Kanban inventory. You actually run out less, less inventory because your suppliers get used to hey I'm, I'm delivering 100 each week or 1,000 each week or 10,000 each week. And, and it just keeps coming in. That flow is so critical because uh, it just, it makes your life so much easier. And the other thing that happens when you take, when you take an inventory, say I've got 40,000 square feet of inventory and I can cut that in half. Well, what do I do with the other 20,000 square feet in inventory now? Or that's not, you know, with full of racks. I can do manufacturing and I can do value added work in there. Not just store junk. Yep. And it's a huge thing.

Speaker C: Or you can cut your uh, you know, you can move to a smaller facility and save a ton on, on space. You have more, you know, room for growth so you don't have to move into a larger facility. Um, there's a lot of, yeah, a lot of opportunity and things that can be done there for sure.

Speaker B: But the inventory turns, like you said, is a big. I think that's a metric that a lot of people, if you haven't really thought about that, it's something that, that can derive a lot of benefits from it when you get that and increase it.

Speaker C: Mhm. Yeah, absolutely. And then you know, during the COVID period when the supply chains were all messed up, you know, it was, that was tough. We had some clients, you know, they, they would, they didn't know how much to order. Right. And so especially if they're getting you Know, offshore China, whatnot.

Speaker B: Yeah.

Speaker C: And so we had a client that ended up with three years worth of inventory. Wow. Because they're like, they just were ordering, they weren't sure what they were going to get, what they weren't going to get. And um, it, you know, fortunately for them, it, their product has a long shelf life.

Speaker B: Yeah.

Speaker C: Um, but at the same time, you know, not all of it was good. Uh, it really strapped them from a cash position perspective. Um, and it just put a real, um, you know, and at the same time they had, they were financing, so they had to have. They had a line of credit.

Speaker B: Yeah.

Speaker C: They're paying interest.

Speaker B: Yeah.

Speaker C: Um, you know, much more interest than they had to be paying because, you know, it was all sitting in their inventory for three years.

Speaker B: Yeah. Yeah. That's wonderful. And it is, that is another reason too when you look at supply chain is to really think about the long term cost. I think Covid is one thing that really taught us the, the, you know, do I. Do I have my entire supply chain coming from the other side of the world all the time or all of it? You know, it's the whole thing there. Do I do 50, 50 and really do a balance? Because, you know, uh, I mean there were out here, I have some friends that ran some pretty large truck upfitters here in the Northwest. They were getting trucks delivered without major components because they needed to get it keep them going. And the truck, you know, major components that the, the factory people or whatever, the service people had to come out and put on them, uh, where they were going. They were drivable. But a lot of the electronics didn't work.

Speaker C: Yeah.

Speaker B: It's just, I mean, it's just crazy.

Speaker C: Yeah.

Speaker B: Yeah, yeah. So that weighing that on the, on the supply chain is pretty interesting, uh, interesting uh, place because it does, it does adjust the profitability of your business. But the long term stability might be outweigh that.

Speaker C: Yeah. Yeah, absolutely.

Speaker B: Yeah. So what are some of the fun things you're seeing in manufacturing and accounting right now? Because, you know, we're in this world of uh, AI is changing everything everybody says. But what are some of the things that you think is really are really changing. Exciting for you on the.

Speaker C: I wouldn't say it's exciting, but the T word, you know, tariffs, you know, that's put a. That's really created a lot of challenges for the manufacturing space. Um, in companies that manufacture overseas or in China especially, it's been very challenging. We've, I've seen a number, uh, you know, the M A market in that space. Um, if you're, if you're doing, if you're manufacturing, you know, outside of the US it put a halt to it because, you know, a buyer doesn't know what your company is worth because they don't know how much your, your. How much your cost of goods sold is gonna, you know, how much you have to pay for inventory. So, yeah, they don't. There's no understanding of what your margins are. And so that, you know, there, there was a number of deals we saw from a M. And a perspective that got put on hold. Some of that's kind of starting to hopefully settle down a little bit. Um, but that, that was a significant challenge and really saying, you know, we had a lot of our clients say, okay, we did have a, we do. We did have an understanding of what our margins were. But now with the tariffs, like, what does that mean and how does that impact our business and what, you know, so providing them clarity, helping to define and provide clarity on that was a big challenge, uh, for us so that they can ultimately say, okay, now I have the information now, what decisions should I make? Do I need to go back to, you know, my customers and say, hey, you know what? You give a little. I mean, a lot of our clients said, hey, you give a little, we'll give a little. Let's just get through this together. Those are the ones that had good relationships with their clients, um, or find other ways to offset some of those costs, um, to continue to be as efficient as possible. So that was a, that was a big, uh, something big that we saw, you know, within the last six months, for sure.

Speaker B: Yeah, yeah. I was, I was in a business, um, was it 2017, 2018, something like that, when we had the tariffs kicked in the first time we manufactured solely in China. And you know, one of the things I was thinking about when, when we were dealing with that earlier this this year, um, was the fact that most people don't realize that that's cash you have to pay. I mean, there's just not like that doesn't go to some, uh, I mean, you're, you're. I bought it for a dollar. And if it's 25% tariff and the boat's coming across, it just went up 25%.

Speaker C: Right.

Speaker B: So a lot of people. And you don't realize that, you know, you can have containers that are multimillion dollar containers if it's right things in them. Yeah.

Speaker C: And if you sell it for a buck fifty, you just, Your margin just got cut in Half.

Speaker B: Yeah, yeah. So it's, it's one of those things that I don't, I don't really, I talked to a lot of people because they didn't understand tariffs and where they got and how it affected. I mean literally your product sat on the dock until you pay, get them. So it uh, is, and, and that's uh, like I said, and it takes, what does it take, a few weeks, a week, 14 days, something like that to come across on the water. So it happened on the way over and you're like, oh, I guess I pay that much more.

Speaker C: Yeah, yeah. So that was tough. But I think that's also a testament to, you know, the companies that know their numbers and have the information that allows them to be quicker at making decisions that they're confident in, to be able to maneuver through, you know, uncertain times. And, and that's really is, you know, as business owners we want to have the information to be able to, you know, feel confident that things come up good, bad, ugly and we have the ability to maneuver. And if you don't have good financial information, you're running blind and you're just kind of hoping for the best. And that's what makes, in a lot of cases I talk to business owners, they say, hey, what keeps you up at night? Knowing if we're going to be in business next week, do we have enough cash to make payroll on Friday? Right. Um, that's why going back to the cash flow, it's okay. The first thing we want to do to ease that is let's make sure we have an understanding of what your cash flow looks like over the next 13 weeks. Then let's start digging into your business and start understanding some of the metrics that, you know, that allow you to pull some levers to make, make better decisions.

Speaker B: Um, so yeah, that cash flow is so important and, and it does. Like you said, a 13 week cash flow will, will change your world because you can see it coming at least if you're going to have a problem and make adjustments.

Speaker C: Mhm.

Speaker B: Yeah. Yeah, very least.

Speaker C: Yeah, for sure.

Speaker B: Yeah.

Speaker C: And you can make adjustments ahead of time and say, hey, you know what? Okay, well, um, you know, payroll, that's you know, payroll is payroll. We know when we're going to pay it, so we got to manage around that or I got a big vendor I have to pay on, you know, at this point in time. Okay, well we have a, we have payment coming in, um, over here. Let's push that one payment back. Yeah, you can move some things around Based on when you make some payments, to manage through that and have that visibility, to know that. Okay, yeah, we're set up. We're good for payroll for Friday. Um, now let's look at the next week and the week after that and so on.

Speaker B: Yeah, yeah, yeah. I can remember in one of my earlier turnarounds, I, I was fortunate enough to work with somebody that, that really had done it a lot. And it was just like that when we, you know, and that when you're in that, that bottom swing of a turnaround and the, the company's profitable and you're coming back out of it, it was, it was always, okay, we've got payroll covered. And then, you know, next thing and you go, okay, this is what we're doing. And every, every vendor knew exactly how we were going to pay and what we were going to do. Because this is, we had talked to the major vendors. They knew exactly what was going to happen. And every time, every week we would tell them what was coming and, uh, before anything went. And it is, it is that cash flow is so critical in business. Yeah, yeah.

Speaker C: I mean, there was a. We, I remember we had a client where we were doing cash flow daily for a while. Yeah, it was pretty, you know, it was, it was very, very tight. Um, somehow you always figure out how to manage through it, you know, um, and a lot of it has to do with communications with your vendors and your customers. And that's why, you know, I always look at my customer, customers and our vendors, uh, from a relationship perspective versus transactional mindset. Right?

Speaker B: Yeah.

Speaker C: Like we're all working together in one business community. We all. I want my vendors to be successful, I want my customers to be successful, and I would hope that they'd have the same for me. And when times get rough, we work together to make sure that we help each other out to get through it. Um, but if, if you look at it as I want to get to stick it to you for the best deal and stick it over here to you and you know, and you look at it as a transaction, it makes, it makes, uh, your business career a little bit more challenging.

Speaker B: Yeah, yeah. And that really is because, because sometimes it's, it, it's not a big deal for a customer to pay you a week ahead if they had to, or if you had to tell a supplier, hey, I need to wait a week because, you know, something happened and you know, make, make sure that's going to happen, but that it is, it's a business community and these are long term relationships. Typically that you're going to have with someone and, and or uh, their company and that's that, that is how you get through these things.

Speaker C: Yep. Yeah, for sure.

Speaker A: Yeah.

Speaker B: So what's, what's fun, what's fun in your world, you know, uh, Citron, Cooperman. What are you guys focusing on for 2026? It's going to be a good year.

Speaker C: Yeah. Um, you know our, our, we're, I think we're in a really good spot. I mean I think that, or I know, you know, our focus is the, the small mid market business community. We do, you know, in some cases we might, you know, compete with the big four. But um, in most cases it's, you know, our core is our, our clients that, you know, business owners, entrepreneurs, um, they've grown their business, they've been successful, they're looking at taking to their business to the next level. Maybe they have, they're looking at what the next steps are in their career, their life, etc. Um, and so you know, I think coming, I'm, I'm cautiously optimistic for 2026. I think coming into 25. Um, you know, I think we were all thinking, hey, this is going to be great. I think the tariffs kind of put a little spook in the market and then the economy and in the business community. Um, but I think there's a backlog of some real good companies out there. I think we're going to see an uptick in um, M and a mergers acquisition type activity as we move forward into 2026. Um, with that comes opportunities for everybody, I think.

Speaker B: Ah.

Speaker C: Um, so what I always talk to my clients about is even if you're not looking to sell your business tomorrow or today, it's always important to run your business to be thinking about how we maximize business valuation, um, and the value of your business. So know how your business is valued in the market. Um, and then how do you maximize that valuation? And what I mean by that is in manufacturing it's a lot of times you're, you're being acquired based on what they call multiple of ebitda, right? Yeah. And EBITDA is your net income and you add back, you know, depreciation, interest, amortization, etc. And um, so if you have a $10 million company and your EBITDA is 2 million, you have 20% EBITDA, um, let's say, and in manufacturing they'll pay. You know, in your industry they might, the, the range might be between. Uh, if you were to be acquired, a buyer might pay somewhere between 4 and 8 times EBITDA, let's say, well, 4 and 8 times, that's a big amount. Like if it's 4 times EBITDA and you have 2 million, you're selling for 8 million.

Speaker B: Yeah.

Speaker C: If it's uh, 8 times EBITDA, you're selling for 16 million. So same revenue, same EBITDA, same. But you're, you're getting paid twice as much as the low end. Right. So, so what does that mean? And how do we, how do we, as a business owner, how do we look at our business to say, okay, I want to be at, ah, the eight, close to the eight times, um, valuation, not the four. And so what does that mean? You know, I mean an easy, some of the easy examples would be, uh, if 70% of my revenue was one client. Well, that's, the buyer's going to discount your business because there's a lot of risk. So the buyer is always looking at risk when they look to acquire. And so the most you can de. Risk your business, um, through um, you know, obviously client concentration, uh, maybe product mix, maybe where you sell, maybe industries that you sell into. Um, another big one we see is reliance on owner. And meaning if I'm the owner and I haven't built up a management team around me and I'm the number one salesperson and I manage all of the operational sides of the business, what value is there if I actually leave? Is there value in the business? Right, yeah. Um, and so building that management structure and that foundation infrastructure around you so that, hey, if I sell, I can walk away and the business can run on its own. Those are the most valuable businesses as well. So those are just some kind of nuggets that I've seen, uh, that I like to, we like to work with our clients on as they move forward. You know, look at maybe should I exit or should I not?

Speaker B: Yeah, yeah. And it's a big decision and, and I, I think it's great for you to be bringing up the clients because it's a, it's a multi year process really to get ready to sell a business. And most people don't understand that, you know, because it does affect everything from the supply, the, the suppliers we use, the customers we have, how much the owner's involved in the business, and even things, as we discussed earlier, how many inventory turns we get, if I have one inventory turn a year, or if I have 10 inventory turns a year, that's drastically different in the amount of uh, cash that it requires to operate the business. There's all Those things that make a big difference.

Speaker C: Yes, for sure.

Speaker B: Yeah. Well, Jason, it's been awesome talking with you today. I just appreciate you so much stopping by and talking about, you know, what you guys are doing there, Citron, Cooper, Cooperman. And talking about, uh, manufacturers and some of the key metrics they really need to understand and just going through some of the real world things that you see in manufacturers that you guys are helping with their accounting and their monthly stuff and just their financials overall and their financial management. Really?

Speaker C: Yeah.

Speaker B: Thank you.

Speaker C: Yeah, absolutely. I think, you know, what's important is companies that get to a point is do they have the right financial and accounting leadership, whether that's internally from a team that's beyond the bookkeeper. Right? Yes. Somebody that has that sophistication that can drive things forward, um, can provide those insights, can work with you on the reporting, um, because ultimately to get to that next level, you're going to need that. Um, whether it's to make decisions or even if you want to ultimately exit, you're going to be asked for that information.

Speaker B: Yep. Yep. Good stuff. Well, thanks so much for being here today. I want to thank Liz. Thanks for stopping by today and dropping a comment. These are great reminders. Thank you. That's what she had to say. And I can see we had other people there listening. Thank you so much for out there watching us. If you got in late and you want to hear it all, get back to the beginning and listen to Jason from the beginning. Because if you are a manufacturer and wondering if, well, maybe what are some of the things I should be worrying about? He dropped a lot of golden nuggets in there. So we're out for now, Jason. Hang out and we'll finish up offline.

Speaker C: All, uh, right. Thanks, Damien.

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