PrecisionFast Ltd: The Manufacturing Multiplier
When High Earnings Don’t Mean High Value
John stared at the valuation report, his hands shaking slightly. $6.6 million. For a business generating $2.2 million in EBITDA from $9 million in revenue, it felt like a slap in the face. He’d built PrecisionFast Ltd. from nothing, creating one of Ontario’s most respected aerospace parts manufacturers. His custom-machined components met tolerances measured in thousandths of an inch. His rejection rate was under 0.5%. His clients loved him.
So why did the M&A broker just tell him his life’s work was worth only 3x EBITDA?
“What happens if you get hit by a bus?” the broker asked bluntly.
John bristled. “I’m 54 years old and in perfect health. That’s not…”
“It’s not about your health,” the broker interrupted. “It’s about what buyers see when they look at your business. And right now, they see John with a building full of machines, not a business that runs without John.”
The Wake-Up Call: Revenue Isn’t Value
The due diligence revealed PrecisionFast’s structural problems:
Customer Concentration Bomb: Two aerospace clients generated 60% of revenue. Boeing and Bombardier contracts that John had personally negotiated over 15 years. Great relationships, terrible risk profile. If either client consolidated suppliers or switched to overseas manufacturers, PrecisionFast would implode.
The John Dependency Problem: No sales team existed beyond John and his Rolodex. He negotiated every contract, approved every quote, and maintained every major client relationship personally. His operations manager was brilliant at manufacturing but had never closed a sale in his life.
Tribal Knowledge Trap: Ask how to set up the 5-axis CNC for aerospace-grade aluminum? “Talk to Bob, he’s been doing it for 18 years.” Quality control procedures? “Everyone just knows.” Client specifications? Filed in John’s office, organized by a system only John understood.
Financial Opacity: The numbers were accurate—John’s cousin was a competent bookkeeper—but no external review meant buyers assumed aggressive accounting. No real-time dashboards, no KPI tracking, no management reporting beyond monthly P&L statements.
One broker summed it up perfectly: “You’ve built a profitable job for yourself with expensive equipment and employees. That’s not an asset we can sell for a premium.”
The 18-Month Transformation: Systems Over Hustle
John made four systematic changes, each addressing a specific risk factor:
Building Leadership Infrastructure: John promoted his operations manager, Tom, to General Manager with full P&L responsibility. They documented every supplier relationship, client specification requirement, and contract negotiation framework. John recorded video walkthroughs of his negotiation approaches, client relationship strategies, and pricing methodologies.
Six months in, a major client called with a quality issue. Tom handled it independently—investigating the root cause, implementing corrective action, and communicating with the client. John only found out afterward. The client never knew John wasn’t directly involved.
Strategic Customer Diversification: Instead of chasing larger aerospace contracts, John shifted focus to 10 smaller clients across medical devices, defense systems, and precision instrumentation. He locked in 3-year contracts with annual price escalation clauses tied to aluminum costs and CPI adjustments.
Within 18 months, no single client represented more than 15% of revenue. The business could lose Boeing tomorrow and survive.
Financial Transparency Upgrade: PrecisionFast moved to reviewed financial statements prepared by an independent CPA firm. John installed real-time dashboards tracking gross margin by client, capacity utilization, on-time delivery rates, and quality metrics. He brought in a fractional CFO on retainer who provided monthly management reports and quarterly board presentations.
Buyers could now trust the numbers without extensive due diligence discounts.
Infrastructure Modernization: The company migrated from QuickBooks and Excel to a cloud-based ERP system integrating financials, inventory management, production scheduling, and CRM. John created a secure knowledge base documenting every critical process, from quote generation to final inspection protocols.
The Result: Same Earnings, Double the Value
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