How do I raise prices on customers who were loyal to the previous owner?
Treat it as a relationship transfer with a price attached, not as a price change with a relationship problem. Three things carry most of the weight: the increase comes from you personally to the accounts that matter, before it arrives as a letter to everyone; it is attached to something specific and true — a cost, a service level, a term — rather than to "new ownership"; and the largest legacy accounts are phased or cohorted rather than moved in one step. The failure mode is deferring it out of deference and then needing a much larger increase eighteen months later, which is the version the customer experiences as a new owner extracting value.
Sources: A2-02 · B2-09
Should I add an annual escalator to my contracts?
For an acquirer with a book of inherited contracts, an escalator is the single highest-leverage change available, because it compounds without requiring another conversation. A defined annual adjustment — a fixed percentage or an index — converts the price increase from an event you have to nerve yourself up to into a term both parties agreed once. Put it into every renewal and every new agreement from your first month; the contracts you inherited will mostly not have one, and that absence is a large part of why prices had not moved in years.
Sources: B2-04 · A2-09
How do deposits and payment terms change my cash flow?
They are a pricing decision that lands directly in your cash conversion cycle, which is why they matter more to a leveraged buyer than to almost anyone else. A deposit collected before work begins and a progress-billing schedule tied to milestones can move a business from funding its own work-in-progress to being funded by it — that is what a negative cash conversion cycle actually is, and it is achieved by terms rather than by collections effort. The same lever runs the other way: extending terms to win a large account can consume more cash than the account contributes for a full quarter.
Sources: B2-04 · B2-01
What is a 13-week cash flow forecast and how do I build one?
A 13-week cash forecast is a direct-method, weekly projection of receipts minus disbursements, rolled forward one week at a time. Direct method means you build it from actual expected cash events — this customer's invoice, that payroll, the loan payment — rather than adjusting net income, which is what makes it usable for a decision on Tuesday. Thirteen weeks is a quarter: long enough to see a seasonal trough or a covenant test coming, short enough that the individual lines are real rather than modelled. For an owner carrying acquisition debt it is the operating document, because it is the only one that answers whether the payment clears.
Sources: B2-01 · INT-01
What is a good cash conversion cycle?
There is no general answer and we will not invent one: the cycle is days inventory outstanding plus days sales outstanding minus days payable outstanding, and what counts as good depends entirely on the model. A distributor and a services firm are not comparable, and the generic answer circulating online is written for a public company with a treasury function. The reading that actually applies to you is relative rather than absolute: compare the cycle to your own baseline at close, and compare the cash it ties up to the headroom in your debt-service calendar. A cycle that shortens by ten days is a real result; a cycle that matches an industry median you cannot source is not.
Sources: B2-01 · INT-01 · no benchmark value published
What is DSCR and why does my lender care?
Debt service coverage ratio is cash available for debt service divided by total debt service, and it is the number that tells a lender whether the business generates enough cash to make its payments. We publish the formula and decline to publish a threshold, and the reason is worth knowing: the widely-repeated claim that the SBA requires 1.15x could not be verified against any retrievable SBA source — the current SOP is a Word document in which the clause was not located, and the public program terms state only "reasonable ability to repay". Your lender's own credit policy is what binds your deal. Ask them for their covenant in writing rather than trusting the figure everyone repeats, because you will be operating against it for years.
Sources: A1-06 · A1-07 · no benchmark value published
How do I rebuild a chart of accounts after buying a business?
Design it against the numbers you intend to run the business on, and do it before you migrate anything. The chart of accounts you inherited was built to file a tax return, which is why it can tell you total revenue and cannot tell you margin by service line. Work backwards from the scorecard: if you want gross margin per service line, per crew or per branch, the account and class structure has to produce it without anybody re-keying. Doing this after a system migration means doing the migration twice, and it is the most common expensive sequencing mistake in the first year.
Sources: B2-09 · INT-01
Are the businesses I'm buying usually under-priced?
Practitioners overwhelmingly say yes, and we label that as practitioner convention rather than as a statistic, because no source quantifies it. The mechanism they describe is consistent and plausible: an owner who built the business on relationships raises prices reluctantly and stops raising them entirely in the years they are preparing to sell, so the price list arrives at close having quietly fallen behind costs. Treat it as a hypothesis to test on your own margins in the first quarter — by service line, not in aggregate — rather than as a licence to raise everything by a number somebody quoted you.
Sources: B2-04 · B2-09 · no benchmark value published
What is DPO and should I stretch it?
Days payable outstanding is accounts payable divided by cost of goods sold, multiplied by the days in the period — and no, not as a policy. Stretching payables is real cash and the cheapest financing in the business right up to the point where it becomes the most expensive: a vendor who reprices you, moves you to the back of an allocation queue or asks for cash on delivery costs more than the float was worth, and in a trades or distribution business those vendors are the supply. The legitimate version is negotiating longer terms openly, for something in return. The other version is paying late and calling it treasury.
Sources: B2-01 · B2-09
How do I set a close deadline that satisfies my lender?
Work backwards from the covenant calendar rather than from what the books are comfortable producing. Your loan documents specify when financial statements and any compliance certificate are due, and that date sets the close deadline; everything upstream — bank reconciliation, payroll accrual, inventory, revenue cut-off — has to finish inside it. Get the requirement in writing from the lender rather than inferring it, then publish the close as a dated checklist with a named owner per line. A close that slips becomes a covenant conversation, which is a different and considerably worse conversation than a slow month.
Sources: A1-06 · B2-09 · INT-01
How do I know how much revenue decline my business can survive?
Solve break-even again with debt service treated as a fixed cost: contribution margin times revenue, minus fixed costs, minus debt service, set to zero and solved for revenue. The gap between that figure and today's revenue is the decline you survive, and it is a much narrower gap than the pre-acquisition break-even implied — which is exactly why the seller's historical financials do not answer this question. Two things move it: contribution margin, which is a pricing and cost-of-delivery problem, and the fixed base, which is the one you can act on inside a quarter. Run it before you need it.
Sources: A1-07 · B2-09
What is value-based pricing for a service business?
Value-based pricing sets the price from what the outcome is worth to the customer rather than from what it costs you to deliver it — in a service business, usually the downtime avoided, the risk transferred, or the labour they no longer have to carry. We describe the method and decline to reproduce its canonical break-even-sales-change formula, because the publisher returns 403 to automated requests and restating a formula from memory is how errors enter a corpus. In an acquired company the entry point is narrow rather than wholesale: emergency, after-hours and specialist work is where an inherited price list sits furthest from what the job is worth.
Sources: A2-09 · B2-04 · no benchmark value published
Should I move from time-and-materials to flat-rate pricing?
Flat rate transfers duration risk from the customer to you, which is the whole trade, and it only works if you already know your own job times. In home services it is the defining pricing decision and a flat-rate book conversion is a classic post-close margin lever: the customer gets a price before the work starts and stops paying for a technician's slower day. Where it goes wrong is the arithmetic — a book built by adding a markup to cost and a book built to a target margin are not the same book, and a 50% markup is a 33% margin. Fix that conversion before you print anything.
Sources: B2-04 · B2-09
How do I test a price increase when I only have 200 customers?
You cannot run a clean elasticity test at that size, and we publish no elasticity estimate because there is nothing honest to publish at it. Any split you construct is too small to separate the price effect from seasonality, from who happened to renew that month, and from the fact that your customers are not interchangeable with each other. The substitute is sequencing rather than statistics: move one cohort at a time and watch what actually happens — new customers first, then renewals, then the legacy accounts — and treat the first cohort's response as information rather than as a measured coefficient.
Sources: A2-09 · B2-04 · no benchmark value published
