How To Value A business On A napkin!#businessvaluation#networth#entrepreneurs#bussinessadvice#investing#consulting
I didn't feel like hitting the cap button on the Hi! So Hi!
So how do you value a business? How do you buy a business? How do you know how much its worth and not to overpay?
Heavy subject. Easy subject! When you go to buy a business the steps are simple;
1 you sign a non disclosure agreement(no one wants to know the business is for sale!)
2 You do your due diligence, unless you were like me and be a complete nut and just buy it!
I read somewhere were David ? bought Victoria's Secrets off of a guy guy for $1 million dollars! Sight unseen? Wow that took guts. I guess the guy he bought the company from, jumped off the Golden Gate bridge about 5 years after he bought it!
Business can be very unforgiving.
So how do you value a company really quickly? It is very simple. you can do it like Warren Buffet and base it all on cash flow! He has a pretty good track record. ha. or you can base it on a multiple of Ebitda(pronounced ebit-tah -dah)!
That is simply a multiple of that number, assuming the books are in order, which in many privately held corporations they are not!
1) be in some place that has napkins
2) make sure you have a pen!
3) Take the EBITDA number and multiply it by 4-8 depending on the industry!
Bingo, that's what you should pay for it! Now, for the hard part. Negotiating to buy a business that someone has built and it is their entire life!
Yuck, not a good thing but very necessary when trying to aggressively consolidate!
Hey its just business right? Well, NO its not. It is a privately held company that could be however old! You need to have a certain skill set for this, otherwise you will fail!
That's where I come in, after all, I bought a business from my boss. You want to know how really hard that is? I bought it from my boss, whose father started the business. You don't think that took a lot of negotiating, as well as dealing with our personal issues, our business issues, and much more than that!
Please reach out to me, if you need help in this area! I can help! I guarantee it!