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Trailing twelve months (TTM)

Trailing twelve months means the most recent 12 consecutive months of figures, whatever the financial year. It gives a more current view than the last set of annual accounts.

Also called TTM, trailing twelve months

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Definition

Trailing twelve months (TTM) means the most recent 12 consecutive months for which figures are available, whatever the business's financial year. It is also called the last twelve months (LTM). Buyers use TTM revenue and profit because a financial year that ended many months ago may no longer reflect how the business is performing.

Worked example

Maple Ridge Heating Ltd is a fictional Canadian business with a financial year ending 31 December. It is being sold in the autumn, and its latest monthly accounts run to the end of August.

  • Revenue for last financial year: C$2,000,000.
  • Revenue from January to August this year: C$1,400,000.
  • Revenue from January to August last year: C$1,300,000.

TTM revenue = C$2,000,000 + C$1,400,000 minus C$1,300,000 = C$2,100,000.

The same method works for profit, as long as the monthly accounts are prepared on the same basis as the annual ones.

Why buyers care

A listing that quotes the last full financial year can hide a recent slide, or flatter a business whose best months have passed. Ask which period each figure covers and whether it is TTM, a financial year or an annualised run rate.

Check that the months inside TTM do not include one-off contracts or unusual orders, and compare TTM with the 12 months before it to see the trend. Loupe's valuation tool asks for revenue for the 12 months before as well for this reason, and a Loupe dossier restates listed figures as normalised TTM figures where the evidence allows.

Run rate

A run rate annualises a recent short period, such as last month's revenue multiplied by twelve. It shows current pace, not what the business actually earned over a year.

Related terms

  • Run rate

    A run rate annualises a recent short period, such as last month's revenue multiplied by twelve. It shows current pace, not what the business actually earned over a year.

  • Normalised earnings

    Normalised earnings are profits restated to show what a business would earn in a typical year under a new owner, after removing one-off items and correcting costs that are not at market rates.

  • Seller's discretionary earnings (SDE)

    Seller's discretionary earnings is the yearly financial benefit a business gives one full-time working owner, before financing costs, non-cash charges and one-off spending.

  • EBITDA

    EBITDA is earnings before interest, tax, depreciation and amortisation. It helps compare operating profit across businesses, but it is not the same as cash.

Guides

  • How to read a business-for-sale listing

    A listing is a sales document written to win enquiries. This guide shows how to read its numbers, its wording and its gaps, and how to turn them into questions before you sign an NDA.

    10 minutes to read

  • SDE and EBITDA explained with worked examples

    SDE and adjusted EBITDA both restate a business's profit for a buyer, but they answer different questions. This guide builds each one up line by line for two fictional businesses and shows which to use.

    9 minutes to read

  • How small businesses are valued

    Most small businesses are valued as a multiple of their earnings. This guide explains how the earnings basis is chosen, why size and quality move the multiple, and why an asking price is not a sale price.

    11 minutes to read

Red flags

  • One-off revenue inside the last 12 months

    A contract, windfall or spike that will not repeat can sit inside the last 12 months and be priced as if it will. Take it out before you value the business.

    Severity: price it inFinancials

  • Declining revenue or profit

    Falling sales or profit mean the business you take over is likely to earn less than its history suggests. Listings often price in the better years.

    Severity: price it inFinancials

  • Figures that change between the teaser and later documents

    Revenue, profit or add-backs in the teaser or listing do not match the information memorandum, the management accounts or the tax returns. Some changes have a simple explanation; others mean the first figures were never real.

    Severity: price it inSeller and process

Free tools

  • See a low, likely and high value from the figures you have, and whether the asking price holds up.

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