January 02, 2006

How to get a get a better multiple on your exit?

Jeff Cornwall quoting The Christman Group LLC (a firm that specializes in exit planning for entrepreneurs) has a list of items which a buyer woult look at when determining what multiple of your EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) to pay for your company.

Number 9: Depth of Management and of the Sales TeamIf an owner wears all of the hats, including generating most of the sales, the price will go down. A strong and experienced management team to operate the business is key value driver.

Number 8: Customer BaseIf a company has limited customer concentration with no single customer representing more that 5-10% of revenues the price goes up. If the customer base is made up of “blue chip” companies, the price goes up too.

Number 7: A Good Story to TellTelling a company's story is critical in helping the buyer recognize the full value of a business. An extensive confidential offering memorandum that describes the business operation, the marketing and sales programs, its organizational structure, its facilities and equipment, its financial performance, and provides a financial analysis including a believable 5 year financial forecast....

Number 1: Having Multiple Buyers
When there are multiple buyers bidding on a business, the price of the business will exceed the price paid for a business that is sold without competitive bids.


Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.