Is it better to own a big chunk of a small business or a minority stake in a big company?
It’s one of the fundamental questions all owners must wrestle with. Owning a relatively small slice of a big pie has worked out well for both Elon Musk and Jeff Bezos, who recently traded places on the list of the world’s richest person. Musk still owns around 20% of Tesla, and Bezos controls about 10% of Amazon, so they both have chosen to sell most of their company to fund their ambitions. The success o…
Your age has a big impact on your attitude toward your business, and your feelings about one day getting out of it.
For example, one person who runs a boutique mergers and acquisitions business refuses to take assignments from business owners over the age of 70.
He has found that septuagenarians are so personally invested that they can rarely bring themselves to sell their business – frequently calling off the sale halfway through, claiming they just wouldn’t know what to do with themselves …
Have you struggled to identify a recurring revenue model that will work in your business?
If so, you’re not alone.
Most owners understand the benefits of recurring revenue, such as predictable cash flow and an increase in their company’s valuation, but struggle with where to start. Just changing your pricing from a one-time transaction to a smaller, recurring fee does not make a sticky subscription model.
The first step of creating a recurring revenue model for your business has nothing to …
If you were to draw a picture that visually represents your role in your business, what would it look like? Are you at the top of an organizational chart, or stuck in the middle of your business like a hub in a bicycle wheel? The Hub & Spoke model is a drive that shows how dependent your business is on you for survival. The Hub & Spoke model can only as strong as the hub. The moment the hub is overwhelmed, the entire system fails. Acquirers generally avoid these types of managed businesses …
When was the last time you calculated the percentage of your net worth tied to your company’s value?
When you started your business, its value was probably negligible. Unless you purchased or inherited your company, it wasn’t worth much when you opened your doors, but over time, the proportion of your assets tied to your business may have crept up.
Let’s imagine a hypothetical business owner named Tim, who starts his company at age 30. He has a little bit of equity in his first home and a…
Stephanie Breedlove started Breedlove & Associates in 1992 as a way to pay her nanny. The big payroll processors weren’t interested in dealing with one person’s wages and doing it themselves was complicated and time-consuming, too much for the then overwhelmed Breedloves.
Breedlove saw a business opportunity and started a payroll company for parents who needed to pay their nannies. By 2012, Breedlove & Associates had grown to $9MM in revenue and then she received a $54MM acquisition offer.…
If you’re trying to figure out what your business might be worth, it’s helpful to consider what acquirers are paying for companies like yours these days. A little internet research will probably reveal that a business like yours trades for a multiple of your pre-tax profit, which is Sellers Discretionary Earnings (SDE) for a small business and Earnings Before Interest Taxes, Depreciation and Amortization (EBITDA) for a slightly larger business.
Obsessing Over Your Multiple
This multiple can trans…
Most company founders are good at the first stages of entrepreneurship. But in the
phases that follow, they may only be average. Just because you have a knack for
starting companies, doesn’t necessarily mean that those skills translate well into
There are celebrated cases of founders who have successfully started and grown a
business – Elon Musk and Bill Gates come to mind. There are, however, many more
examples of entrepreneurs who perform well initially and then hold back their
Why Companies are Adopting Subscription Billing Models
Volvo recently announced they will make their cars available on a subscription model where consumers will pay one fixed fee per month for access to a car which includes insurance and maintenance.
Everything from tooth brushes to flowers are now available with subscription billing.
Could you offer some sort of recurring plan to your customers? Here are six reasons to consider offering your customers a subscription:
1. Predictability: When y…
If you decide to sell your business to an outside acquirer, you’re going to have to decide between a financial and a strategic buyer—understanding the different motivations of these two buyers can be the key to getting a good price for your business.
A financial buyer is acquiring your future profit stream, so they will evaluate your business based on how much profit it is likely to make and how reliable that profit stream is likely to be. The more profit you can convince them your company wil…
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