What if I told you as a business owner that your company may be worth a LOT more than you think?

One of the common valuations today is a multiple of EBITDA, right?

I talk a lot about the factors that increase the multiple. Things like customer concentration, competitive advantages, strong culture, owner dependency, etc.

Here’s the thing that many business owners do not understand.

The EBITDA calculation is an adjusted version, NOT what you use on your current financials.

Why? Because it may not show the true earnings of the company.

We’re incentivized to deduct as much as possible to lower earnings and therefore lower taxes.

There may be things we run through the company that a buyer wouldn’t. Things like:

– Cars, cell phones, boats, vacations

– Family members overpaid for roles

– Large bonuses and holiday parties

If you analyze those items and add them back into the EBITDA, you may find you have a much more valuable company from a buyer’s perspective.

Talk to your CPA about creating an adjusted version of the financials for your review. You may be extremely surprised.

There’s more to calculating the value than just EBITDA but it’s a really good start to understanding what your company may really be worth.

It’s always best to be prepared in case the right person calls.

I’ll be posting more examples this week for you to consider.

Rich Hall

Certified Exit Planning Advisor

Originally Published on https://www.richhallgroup.com/blog

Rich Hall Certified Exit Planning Advisor | Business Advisor | Baby Boomer

Rich is a Certified Exit Planning Advisor (CEPA) and business advisor with substantial experience in business coaching, advising, leadership development, business valuation, value acceleration, succession planning, and more. Rich is also a certified Baby Boomer!

​He is a member of Silver Fox Advisors, facilitates CEO Roundtables and nationwide mastermind groups. He was recognized as one of the Top 15 Coaches in Houston in 2022.

​Rich earned his undergraduate degree in Management Science from Georgia Tech, his MBA from the University of Houston, and his CEPA certification from the Exit Planning Institute.

He is the proud father of three sons, Jeremy, Mark, and Daniel, the grateful husband to his wife Jamie, and best friends with Bucky and Riley (dogs).