Your CPA Saved You $50k (And Cost You $500k)
As you review your 2025 tax filing drafts, keep one ratio in mind: 8-to-1.
For every $1.00 of profit you "minimize" to save $0.30 in taxes today, you lower your company’s exit value by $5.00 to $8.00 tomorrow. This is the Tax Valuation Trap, and it is a trade-off most owners make without realizing it.
Your CPA has a clear mandate: protect your cash today by minimizing your tax liability. But buyers and banks do not value your company based on the tax you saved.
They value you based on your earnings and your ability to scale (aka profit). The fancy finance term for profit that you'll often hear in these valuation conversations is EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
Middle-market companies often trade at a 5x to 8x multiple of EBITDA. That is where the $5.00 – $8.00 in future upside comes from for every $1.00 of your profit today.
Don't step over dollars (sometimes millions in valuation) to pick up dimes in tax savings.
GET TO THE POINT
Before you sign that return, take the lead on the valuation side of the conversation. Ask your CPA these three questions to ensure your tax strategy aligns with your legacy:
Your CPA is doing their job by deducting discretionary expenses. Your job is to ensure they are easily identifiable so a future buyer can "add them back" to your profit.
Banks lend against cash flow. If your return shows zero income, your credit capacity may vanish right when you need it to scale.
If you plan to sell, you need to transition from "minimizing tax" to "maximizing profit" now.
Your CPA is the expert on the tax code. You are the architect of your company’s value. Make sure both are talking.
Onward,
John Krebsbach
Managing Partner
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