Jason Taken will ask for the last six months before he asks for the peak year. HedgeStone would rather run an honest asset-aware process than a doomed growth story. Worth is the earnings-versus-OLV page. This page is when earnings have already slipped.
What is declining versus distressed on a plant file?
Declining: revenue and margin are down, the floor is still operating, vendors are current, and a going-concern buyer can imagine a smaller book. Distressed: cash is tight, liens are angry, a key customer left, or the owner is done. Both need an asset inventory. Distressed needs it first.
ISM August 2026 PMI 54.6 and Prices 71.1 (Source: ISM) describe a cost climate. Fed G.17 July 2026 utilization 76.0% (Source: Fed G.17) describes the nation’s machines, not yours. Do not paste those prints into a CIM as proof you will rebound.
| Symptom | Buyer method | Structure that sometimes clears |
|---|---|---|
| 20–40% revenue drop | Annualize recent months | Lower cash; earn-out on recovery |
| Lost whale | Concentration rewrite | Holdback; walk |
| Old iron, thin earnings | OLV vs SDE | Asset deal + short transition |
| Dirty dirt | Phase I | Escrow or pass |
| Vendor stretch | Cash diligence | Smaller peg; more cash at close |
| Owner exhaustion | Transition risk | Short stay; asset buyer |
SBA 7(a) remains a $5 million cap with a 10% injection under SOP 50 10 8 (Source: SBA). A turnaround that needs new working capital and a hope recast is usually the wrong exclusive for an individual who must personally guarantee the loan. Conventional, asset, or strategic buyers who can fund a rebuild are a different list.
BizBuySell’s 2021–2025 manufacturing 2.75x median SDE (Source: BizBuySell / Iconic) assumes a going concern someone wanted to operate. A peak year that is gone is not that set. The 2025 223-day median close (Source: BizBuySell) is also a long time to stay distressed while you pretend otherwise.
How should the recast and the CIM tell the truth?
Show trailing twelve, trailing six, and the peak year as three columns. Explain the drop with invoices, not adjectives. If a customer left, say the percentage. If a cell went down, say the serial. If you cut maintenance to save cash, say that — QoE will find the deferred capex anyway.
Do not add back “lost sales we will win back.” Do not add back ordinary overtime you cut because the book shrank. Do add back a documented one-time flood or a documented legal settlement. Documents, not vibes.
If OLV of the iron plus cleaned net working capital exceeds any honest earnings value, lead with the asset floor. Old equipment is the appraisal page. A 4x story on a $90,000 run-rate is how you waste a year.
What should the first data-room packet contain?
Serialized machine list and lien search. Cash, AR, AP, and a 13-week picture if you have one. Inventory classes with E&O already marked. Any Phase I. The debt schedule. A one-page list of angry vendors or tax liens. The peg on a distressed file is often smaller and more physical. Do not define it as a trailing average of a year that no longer exists.
Housekeeping still matters. Buyers who pay for iron want to see it. They do not want a growth poster in the break room.
Who is the clearing buyer when the earnings story is thin?
An operator who needs that process and already has overhead. A competitor who wants the customer remnants and a cell. An equipment buyer who will keep a short transition. A searcher or SBA buyer is possible only if the run-rate still services debt after a replacement wage. Buy-side readers should not confuse a distressed listing with a platform.
Earn-outs can bridge a recovery if the metric is named-account gross profit and the buyer can actually operate. They cannot be the entire price if you need cash to retire.
What does an illustrative peak-year miss look like?
Illustrative only.
Peak SDE two years ago: $410,000. Trailing six months annualize to $180,000. OLV of the cells: $520,000. CIM asks 3.0x on the peak. First serious party asks for the last six months and the appraisal. The conversation becomes an asset deal plus a 60-day stay. The owner lost four months arguing for a year that invoices no longer support.
A second file: honest run-rate, E&O written down, Phase I already in the room, liens listed. Two strategics and one equipment-aware operator. Close is not pretty. Close is real.
How should the teaser read when the book is down?
“Revenue off the peak; run-rate and machine list available under NDA.” Do not write “normalized.” Do not write “easily recovered.” Do not write a unique identifier that maps a struggling shop for competitors.
Sell my manufacturing business is the pillar.
How should vendor, tax, and employee claims be listed before a buyer invents them?
Make a claims schedule: past-due AP over a stated age, tax liens, UCC filings, pending litigation, workers-comp, warranty, and any customer chargebacks. Date it. Update it. Distressed files that hide a tax lien until the title search are not “protecting confidentiality.” They are burning the only parties willing to look.
Preference and fraudulent-transfer questions belong to insolvency counsel if you have been stretching vendors while taking distributions. This page will not diagnose them. It will say: do not pay your brother-in-law’s note the week before an asset sale and pretend it was ordinary course.
If payroll is close to missing, that is a different process than a declining-but-current shop. Say so. A buyer who can fund a going-concern needs a different speed than an equipment buyer.
What transition is honest when the owner is done?
A 30-day stay to introduce remaining accounts and walk the machine list. A longer stay only if you will actually work it. Distressed owners who promise six months and disappear in two are why asset buyers prefer keys and a bill of sale.
Do not promise employees a going-concern future a buyer has not funded. WARN analysis still belongs to counsel if a closing or mass layoff is possible (29 U.S.C. § 2101).
Illustrative only: trailing six months annualize to $140,000 SDE, OLV $610,000, two equipment-aware operators and one strategic who wants a cell. Honest teaser. Close as an asset deal. The peak-year CIM is in the trash. That is success for this file.
Should you keep quoting work you will not be around to finish?
Yes if the jobs close before the process and cash is clean. No if you are stuffing WIP to look busy. QoE and the physical will unwind stuffing. A smaller honest book is easier to sell than a larger fictional one.
How should you talk to remaining customers without promising a going concern you cannot fund?
If a customer asks why lead times slipped, tell the operational truth you already live with. Do not add a sale rumor. Do not promise capacity you will not have if the buyer is an equipment party. If you are still quoting, quote lead times you can hit with the people who remain.
Vendors who are current deserve ordinary orders, not a sudden purge of AP that creates a preference conversation for counsel. Distressed is not a license to be clever with payments.
Illustrative only: remaining book is three accounts at 18%, 14%, and 11%. Honest run-rate CIM. Asset-aware floor. Two parties. The peak-year story stays in the drawer.
How should you treat deposits, progress-billings, and jobs you cannot finish?
If you took a deposit on a job you will not complete, that liability belongs on the schedule. If you progress-billed a job that is behind, WIP and AR may both be fiction. Distressed files that hide deposits create successor fights. List them.
If a customer has already dual-sourced because you slipped, do not count that customer as a recovery story. Count them as residual until a PO says otherwise.
Illustrative only: $70,000 deposits, two late jobs, OLV still the floor. Honest schedule. Asset buyer prices a short stay to finish or cancel. The CIM that ignored deposits spent counsel’s week on refunds.
How should you treat prepaid tooling and customer advances on a shrinking book?
They are liabilities until the job ships. List them. A declining file that spends advances on payroll is a counsel conversation. Do not hide them inside “deferred revenue” with no schedule.
A last distressed habit: stop ordering raw for jobs you will not finish unless cash is already in. Stranded raw is E&O you will argue twice. Quote what you can ship. Decline the rest with a professional sentence, not a recovery story.
One more distressed note: if a utility is close to shutoff, say so to counsel and the broker the same day. A dark plant is a different buyer set. Hiding a shutoff letter is how the only remaining party leaves.
If a key vendor has already moved you to cash-in-advance, say so. That is a going-concern fact, not a personal embarrassment, and it belongs on the claims schedule.
Educational information only. Insolvency, preference, and lien priority are counsel questions. No distressed process guarantees a going-concern price.