Key Insight
TTM is the most important single period in a deal. It's also the easiest to manipulate — sellers pull forward revenue and defer expenses in the months before marketing a business.
Why TTM Instead of Last Fiscal Year
A business listed for sale in May 2026 with fiscal year ending December 2025 has 5 months of current-year data that fiscal year financials don't capture. If the business has been growing, TTM is higher than the prior year — and the seller wants credit for it. If it's declining, TTM may be lower than the fiscal year — and the buyer needs to see it.
TTM captures the actual current run rate, making it more relevant for pricing than a fiscal year that ended months ago.
How TTM Is Calculated
TTM = Prior fiscal year financials + Current year-to-date − Prior year same YTD
This requires monthly income statements or at least monthly bank statements. Sellers who can only provide annual tax returns cannot support a rigorous TTM analysis — which itself is a due diligence signal.
TTM Manipulation
In the 6-12 months before listing, sellers can inflate TTM by:
- Accelerating collection of receivables into the period
- Delaying vendor payments to reduce apparent expenses
- Pulling forward customer invoices or retainers
- Reducing or eliminating discretionary spending that would resume under new ownership
A quality-of-earnings analysis compares TTM to the preceding TTM periods. If the most recent 12 months look materially better than the 12 months before that without a clear business reason, the TTM is suspect.
A business shows $180K SDE in Year 1, $195K in Year 2, and $310K TTM. Seller claims new contracts drove the jump. QoE finds: two large invoices were pulled forward from Q1 of next year, and the owner stopped paying himself health insurance 8 months ago. Adjusted TTM: $225K. The "hockey stick" was manufactured.
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