CHAPTER 1
Why Valuation Matters
Years ago I worked with a company whose owner had received an offer of $150 million from a prospective buyer. Many entrepreneurs dream of that scenario through the long years of sweat and toil it takes to build their business. The offer was generous—10 times EBITDA (earnings before interest, taxes, depreciation, and amortization), the most commonly used measurement of profits. The company’s direct competitors were selling for 6 to 8 times EBITDA.
Yet rather than sell, the owner chose to follow another entrepreneurial dream—handing the business down to the next generation. His daughter had worked for Silicon Valley technology companies and she felt sure that she knew what levers to pull to propel the business ...
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