Buy Back Years of Growth by Buying a Business

How does that business model work if you're thinking about that? I mean, that was fantastic what you did.

I'm assuming the channels held with your current product through this acquisition.

But when you think about increasing multiples, I see how the enterprise value goes up.

How does that, how does that work? And then, and then what's your advice for the founder themselves? Cause I've seen some grow from zero to over, you know, $3 billion.

And when they sell the founder gets about 4 million bucks because they had to give so much away along the way.

that's a big question, but what's, what's your thoughts there?

So, uh, you know, let's talk to fun.

Let's start to talk about fundamentals.

Um, when you're, when you're growing your business and how, what enterprise value is based off of enterprise value is typically a buyer will go in and pay you a multiple of what sometimes it's revenue, but typically of what they'll can cash flow at that business.

And they do it by EBITDA, earnings before interest tax and depreciation amortization.

So basically what you're, you know, what your cash flow in the business.

And if, and there is a certain multiple that they're willing to pay, the larger your EBITDA, of your business, the lower risk someone perceives, the more significant money, the more they'll pay from a multiple perspective.

So if I have a business, let me say just an average service business, I'm running somewhere about, I'd say $300,000 to $500,000.

Maybe I'll get two and a half to three and a half times multiple what someone paid to me.

If I pass the million dollars in EBITDA, maybe I'm between four and a half to five and a half times multiple.

So not only did you increase your EBITDA, you look at that multiple.

And this is what I like to call the ninth wonder of the world is multiple expansion.

The larger you get, the more.

Serious buyers are out there with more money.

There's less inventory out there or basically business of their sales.

Larger your egg, but especially if you're growing nicely.

So people pay more on that.

So here's what I also would love to share is something of these are this is my methodology is really built in my playbook is built for people that own existing businesses.

Okay.

So if someone is good at operating a business, they have a mature business, and I've seen so many cycles of this where someone says, we're going to be right 20% every year.