Why Invest the Time to Improve my Business?

Why Invest the Time to Improve my Business?

Business Value is often Simple Math:
EBITDA X Multiple

EBITDA is defined as Earnings Before Interest, Taxes, Depreciation and Amortization, often adjusted for expenses unique to the current owner(s). These could be luxury cars, vacations, 2nd Homes, Very high or low owner wages, etc.
 
The Multiple is what the Buyer is willing to pay on their perceived ability to continue generating profits and the risks of doing so. Companies generally sell between 1 and 6 times EBITDA; top performers or Companies that provide a strategic advantage for the Acquirer sell significantly higher than 6. Many industries have historic ranges that may differ from the above.
 
The above table suggests a Bottom Performer with $200,000 EBITDA could sell for $200,000. That same company with Industry Leading EBITDA and the Strong Intangibles we discussed in the last issue likely could sell for 6 times EBITDA or $3,600,000. The $3.4 million increase is the potential value of improving your business from a low performer to a Best in Class Company. I suggest all Business Owners consider this Value Enhancement Effort if they have the time, patience, and commitment to change.

Now is the time to learn more. If you are ready to take charge of your future, contact Weiss Advisors today for a no-obligation discovery consultation.