Valuations & Acquisitions: Know What to Ask

To date, I’ve received a wide variety of questions, from the fundamental to the intricate. Some want to know how to calculate earnings before interest, taxes, depreciation and amortization (EBITDA); others wonder if they prospect below their contribution to fixed expense breakeven, thereby significantly increasing sales growth (but depress EBITDA); and whether their multiple valuation deal with potential investors will improve in two to three years. In other words, “What will investors pay the most for: sales growth or profits? And, how does the answer vary when comparing sales per book breakeven to the known/proven prospect universe?”