For founders, CEOs, and CFOs in beauty, consumer, or healthcare approaching a fundraise, sale, or exit
Most business plans do not survive a serious transaction process intact. The assumptions that felt conservative when you wrote them become the first targets when a buyer or investor begins diligence. The cost of discovering that in the room is not embarrassment — it is enterprise value lost to repricing, earnout structures, or a deal that dies quietly.
Roughly seven out of ten business plans I have seen in consumer, beauty, and healthcare transactions fell short of their projected margins — typically by 300 basis points or more. The gap was not always visible because market conditions or multiple expansion masked it. But the plan itself was wrong. Revenue projections in particular almost never land where management said they would. The average gap between projected and realised revenue across the deals I have worked on is somewhere around 20–25%, and the timeline to get there is closer to five years than the two or three most plans assume.
The pattern is not that some business plans are aggressive. The pattern is that most are — and the optimism is structural, not accidental. The management team that wrote the plan was building a case for a valuation, not preparing for scrutiny. A quality of earnings process will cross-reference every projected line against your historical performance. Any line where the projection deviates more than 20% from the trend will be flagged and challenged. If your plan shows 15% growth and you have never exceeded 7%, that gap becomes the opening conversation — and it sets the tone for everything else.
The single most common finding in every quality of earnings report I have seen is margin overstatement. The specifics vary by sector. In beauty, it is trade spend netted against revenue and DTC fulfilment costs buried in operating expenses instead of cost of goods. In consumer, it is freight misclassification, slotting fees, and co-packing variances split inconsistently between COGS and SG&A. In healthcare, it is R&D capitalised when it should be expensed and contract manufacturing variances hidden in COGS. Across all three, once a buyer restates for these, the real margin is typically 200 to 800 basis points lower than reported. In DTC-heavy beauty models, I have seen gaps over 1,500 basis points. In healthcare companies with mixed product, service, and licensing revenue, segment-level distortion routinely exceeds 1,000 basis points.
The gap between the EBITDA a seller presents and the EBITDA a buyer's advisors confirm is typically 15–30%. At a 7x multiple, every €100K of that gap is €700K of enterprise value gone. This is not a negotiation tactic — it is the mechanical result of a restatement process.
There is a second problem that catches sellers consistently: deferred investment. Companies approaching a transaction often cut spending in the final 12–18 months to inflate near-term EBITDA. In beauty, that means packaging redesigns deferred and reformulation costs pushed out. In consumer, it is production line maintenance and warehouse upgrades postponed. In healthcare, it is lab equipment servicing skipped and quality system upgrades delayed. Buyers know this pattern and they check for it — normalised capex will be calculated during technical diligence and deducted from the price.
Multiples have compressed materially across all three sectors over the last three to five years. In beauty, I see roughly 3–5x revenue where it was 6–8x. In consumer goods, mid-market EBITDA multiples have dropped from 10–14x to 7–10x. In healthcare, the range has moved from 14–18x to 10–14x EBITDA. Earnout structures have become standard, not exceptional. In recent transactions across all three sectors, 15–25% of the headline deal value is contingent — meaning the buyer is explicitly discounting the seller's projections and making them earn it back.
A serious buyer will not value your business off a single methodology. They will triangulate from a DCF built on stress-tested assumptions, a comparable companies analysis with size and private company discounts that can total 35–50%, and a precedent transactions analysis. These three approaches frequently diverge by 30–50%. The number you have in your head — probably derived from a headline multiple applied to your forward EBITDA — will not survive contact with this process.
Working capital adjustments now appear in the vast majority of private transactions. Most sellers discover how this mechanism works only after signing the purchase agreement — when a post-closing adjustment reprices the deal by hundreds of thousands.
In consumer and beauty, EBITDA-to-free-cash-flow conversion of 50–70% is the norm. In healthcare, reimbursement lags and front-loaded regulatory costs can push it even lower. That means 30–50 cents of every EBITDA euro never becomes cash. The drivers vary by sector: in beauty, it is new product launches requiring inventory months before revenue and influencer campaign prepays. In consumer, it is seasonal inventory builds and retailer payment terms stretching 60–90 days. In healthcare, it is regulatory submission costs front-loading cash by 12–18 months and equipment lease obligations that sit off the P&L. I have seen companies across all three sectors enter distress with a perfectly healthy-looking EBITDA because nobody mapped the cash conversion underneath it.
A buyer presenting a valuation on an EBITDA multiple will then apply a cash conversion discount. If you have not built the bridge from EBITDA to free cash flow for the last 24 months, you will not be able to challenge their version — and their version will not be generous.
The difference between a plan that survives a process and one that does not is rarely about the business itself. It is about whether the assumptions behind the numbers have been tested before someone with a chequebook tests them for you. That is what we do.
Bonneau Advisory — M&A Strategy for Consumer, Beauty & Healthcare