Today’s episode of the podcast, Robert Hirsch from Freedom
Factory discusses “The Art and Science of Selling Your
Business”.
Listen to the podcast, watch the video, or read the
transcript below.
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Transcript of Podcast
Probably the most frequently asked question that I get is how do
you determine the selling price of your business? And the reality
is its part art and part science. I’ll go over some of the science,
then I’ll go over a little bit of the art, and again, experience
goes a long way.
Coming back to the science part of it, some of the really easy
pieces are are what’s your earnings? Earnings is often expressed in
EBITDA or your earnings before income tax depreciation and
amortization. We convert that into seller’s discretionary cash flow
for all of our clients. And again, when you’re paying your taxes,
EBITDA is a game of minimization. The discretionary cash flow
is a game of maximization or accurately reflecting all the cash
flow that your business generates.
You’re also going to have things like industry multiples, and
sometimes there’s little nuance things like if your e-commerce
business versus a fulfilled by Amazon business, you’re going to get
a really different multiple. So we want to make sure to position it
the right way. Some of the other things, industry codes, we had a
client and the name of their business was excavation.
Turns out that excavation companies are valued at two to two and
a half plus assets. When I say two to two and a half, that’s a
multiple of earnings. Will construction companies of that size are
about four and a half to five. And it turned out that although they
started as an excavation company, over 80% of their revenues came
as a construction company.
So we repositioned it and that helped the industry code. But
whatever we do with all these numbers, we make sure to look at
market comparable and what’s the market looking like? What are the
best sales that we can hang our hat on? How does a bank value it?
Is it going to be an SBA type business? And now all of a sudden
we’re starting to get into the art.
My name’s Robert Hirsch, and I’m the founder here at Freedom
Factory. All we do is help entrepreneurs sell businesses. That’s
100% of our life. When I wake up in the morning, I’m looking at
market comps, I’m looking at sales, I’m looking at, okay, how do we
maximize the sales price of our business and really work as a
partner?
So. Whether you’re a physical company that’s been around for 20
years or a digital company that’s been around for two, we’re going
to look at all the science and combine it with the art to help you
maximize your sales price. Give us a, call it Freedom Factory
today. I look forward to speaking with you soon.
Thank you so much for watching. Please like and
subscribe and we’ll see you soon.
Contact Freedom Factory
Freedom Factory
5500 Greenwood Plaza Blvd., Ste 230
Greenwood Village, CO 80111
Phone: 844-MAX-VALUE (844-629-8258)
https://www.freedomfactory.com/
https://g.page/freedom-factory-denver
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