with Theatrical Supply and Construction Company · Theatrical Supply and Construction Company
LenderHawk analysis. Not affiliated with or endorsed by Acquisitions Anonymous.
A stable top line does not make a business financeable if EBITDA swings from loss to profit across adjacent years.
A seller saying EBITDA was kept low for tax reasons usually signals messy add-backs and weak confidence in the reported earnings.
A 74-person business can still be operationally lean if much of the workforce is project-based or contract labor, but buyers need to verify the staffing mix.
Project-based contractors can hide major diligence risk in inventory because the useful life, obsolescence, and maintenance capex are hard to verify.
A diversified customer base can reduce concentration risk, but it does not solve uncertainty about how the company actually makes money.
A family-owned business with one retiring partner and one continuing partner adds transition complexity that can complicate valuation and integration.
Proprietary or sponsor-sourced outreach often surfaces businesses that are interesting but not truly transactible, which can waste months of diligence.
Reported earnings can look artificially depressed for tax reasons, but the buyer still has to prove the business can run at the claimed margin after cleaning up the books. The concept highlights the gap between tax strategy and transferable earnings.
When to use: Use when seller spending, personal add-backs, or tax-minimization behavior distort the historical financials.
The listing shows $28 million in revenue and $1.3 million in EBITDA for 2024.
Michael reads the stated forward-year figures from the Rejig profile.
2023 revenue was $24 million with $804,000 of EBITDA.
The hosts compare the year-by-year financial history presented in the listing.
2022 revenue was $26 million and the business reportedly lost $400,000.
They note the sharp downturn in profitability despite only a modest revenue change.
2021 revenue was $25 million with $200,000 of EBITDA.
The prior year is used to show how thin margins have been.
2020 revenue was $26 million with $2.1 million of EBITDA.
The hosts flag this as the most puzzling year because it is the strongest margin year during COVID.
The business has 74 employees.
Heather and Michael use the headcount to question how labor-intensive the operation really is.
The company says it is number four in the U.S. for sales in its industry.
Michael cites the claimed market position as one of the attractive points.
The company was founded in 1981 and has been run by two brothers ever since.
The owners’ age and retirement plans shape the transition discussion.
Separate the revenue streams before underwriting the deal so you can see which lines produce real margin and which lines are masking losses.
Why: The hosts believe the combined numbers are too noisy to value the company responsibly without breaking out the components.
Demand proof that personal or non-operating expenses were truly add-backs before capitalizing earnings.
Why: Tax-motivated spending can inflate apparent earnings only on paper, not in transferable cash flow.
Stress-test maintenance capex and inventory obsolescence before relying on EBITDA.
Why: A stage-and-rigging business may have long-lived assets, but replacement and depreciation could materially reduce free cash flow.
Treat a one-owner-stays-on transition as a real diligence item, not a footnote.
Why: Multiple-owner handoffs can create governance and control issues after close.
Assume a project-based business with volatile margins will be hard to finance unless you can make the cash flow much more predictable.
Why: Lenders want consistent, forecastable repayment capacity, and this listing does not currently show that.
The hosts liked the industry and customer diversity but became more suspicious as they walked through the numbers. The more they examined the listing, the more the inconsistent margins, ad-back language, and staffing level suggested hidden complexity or a non-transactable profile.
Lesson: Good industry fit does not overcome broken or opaque financials.
Heather argued that running personal expenses through a business can create a misleading picture of profitability and also degrade company culture. She framed the practice as both a valuation problem and a management problem.
Lesson: Tax games can lower reported taxes but damage transferable value and internal discipline.