Why I don't look at EBITDA when buying a business

This Week in ETA:

• Searchers: EBITDA is sometimes a myth. What you really want to know is “distributable pre-tax earnings.” If you’re buying a marketing agency (which has nothing to depreciate or amortize) EBITDA and distributable pre-tax earnings are the same. But if you’re looking at a manufacturing business, or any business that uses capital equipment, depreciation is real, and ignoring it is just wishful thinking. This post has a great take on the topic.

• Investors: We’re seeing surprisingly high volume & quality of deal flow. I had hoped we’d have 2+ deals to evaluate each week, for a total of 100/year. Instead, with some light outbound outreach, we’re seeing 4-5/week, and many of the deals are quite interesting. Plus, we’re meeting many more pre-LOI searchers each week, and have launched a Preferred Searcher Program to support those who demonstrate strong potential—whether through a compelling thesis, proximity to a deal, or overall preparedness—and to stay connected as they continue their search. Hit reply and tell us if you or a searcher you know might be a good fit.

Plus:

• Having a handle on cash flow is essential. Especially in the first 90 days. 

• Why the Entrepreneurial Operating System (EOS) has been a game-changer for every business I’ve owned. 

Question:

Hit reply and tell us - Where are you finding interesting businesses for sale as a searcher? We’re working on putting together resources for searchers in that area.