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33 comments
It's sort of like all these rap artists that call themselves millionaires when they owe 10 million to bankers and investors just so they can make 1 million in profit. Like that guy from Rich Dad Poor Dad.
Wouldn't it depend on the business and how the former owners ran the business. Take as an example. An AC/heating company. The person selling the business is in his late 60's and is looking to retire. He is taking small jobs and handling customers that he has a relationship with. A new owner would inherit his steady customers. The new owner could easily add to the customer base by adding a few employees.
100k per year in profits for 600k is very nice! People say in 6 years it has paid off. Well even after a year, if you resell the business for the same price it's 100k profit in 1 year!
AVP 👽
On my way
I'd be stoked to buy a business at 6x earnings. 6x earnings is great even if you can't drive growth. But realistically, you likely can. And, assuming the net profit has a CEO salary in there, you can take their place to take that back for yourself as well.
This is the dumbest shit I’ve ever heard.
Lol…. Dave doesn't consider the balance sheet.
Buying a business is buying its assets (less liabilities), thereby replacing the equity owners.Assuring there is 0 growth or shrinkage, $100000 net profit is a good ROI per year.
Which world he is living. Getting $100k/year on 1 million worth of business too is good as long as it has business model to take that 100k/year to 150-$200k/year in next 5 years .
Most businesses will sell for four times what they make in a year. So take the yearly profit and multiply it by four, that's the maximum you should pay for a business.
There is way more informtion needed. It starts with a calculation of ebidta. then looking at deductions that may be taken that won't continue with a new owner. That is only a start
If it’s in the family and the profit was any good, you wouldn’t haven’t but in, you would just take over.
Couldn’t have said it better myself 💯
In fairness Dave’s whole thing is selling courses, and books. That are super cheap to produce and incredibly high margin. His whole other thing is land development which is typically higher margin low volume and time consuming. He clearly has a preference for risky high margin low volume projects, but with a preference for paying cash to avoid notes being called.
And frankly if you have the cash it’s not a bad preference.
Hey, I’m a trucker. My truck grossed $250,000 last year, and I made $125,000 pre tax. Who’s willing to pay me $600,000 for it?
It looks like the financial world has passed Dave by. It's not the 80's, 15% ROI is awesome, particularly because that business requires no personal input from her to turn a profit. Now maybe I'm missing context, but from the clip, Dave is just delusional.
Wouldn't a business with 25% return be worth more than 20% based on the same net return…..
He is so full of crap . What a business throws off to the IRS might not be the same as Owner Benefit . 1 to 4 times EBITDA ( depending on industry) is another valuation method . Cash businesses have more value to most entrepreneurs
Now do this with labor.
contributing X amount of labor.
Company is getting Y amount of profit.
Should they be related in some way?
Like if ur doing 5% of the labor. But getting .0005% of the profit. Shouldnt u be getting paid more?
Like should how much labor u do relative to the company determine how much of the companies profits u get?
If u invest a certain amount of money then u get a certain amount of the profits.
Y dont we ever involve labor?
This man wants 100% profit from year 1 😂😂
He gets on my nerves just here him talking
Guy is full of shit. Nobody would sell a business at 4x NET return.
Thanks Uncle Dave. 25%-20% valuation only ! haha lol
I was under the impression that buying a business if it paid itself back 10 years then all net. Golden rule
And this same guy says to buy the s&p 500 which averages more than 20x price to earnings…. This is really stupid
Depends on the business. 100k net. What can i currently start writing off and how much time does it take me. Can i run it better than the current owner? Do i work there now? Can i replace an employee with myself who is being paid an additional 100k?
Too many un answered questions
Does this chap talk any sense?
Now if you leverages the purchase, people far exceed the 20% return. Who buys a business all cash? Don't get your business or investing advice from Dave, he's only good for the financially illiterate
Let's not talk about the average P/E ratio of fortune 500 companies.
But you well pay exorbitant taxes on unrealised value of your business under Kamala😂😂😂
Makes his money selling Gods word to gullible people and he things he is a business genius.
A 6X multiple is usually a good price for a business that is not in decline. If profits are expected to increase year over year, then that is a good deal. Most valuations are multiples of EBITDA. After the add backs, she is probably looking at something closer to a 4x multiple on EBITDA.
I don’t know any business that trades at 4 times profit. Most industries are 7-8 times EBITDA or more.
Can somebody explain to me what he means in regular people language? In detail.