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Ep. #1 [THEME THREE]
Demystifying Business Valuations: Methods to Value a Business, Normalized EBITDA, and Multiples
Episode #309: with Pat Hobby
Hosted by Ryan Tansom
There are so many terms, philosophies, and methods regarding business valuations that many owners tend to ignore, or they delay addressing their company’s valuation until they want to sell, which is often too late.
In the previous theme, we covered how you can measure and monitor the value of a business–by integrating it into your company’s financials–while you own it. In order to do this, we need to understand how a company is valued and the key concepts and levers that influence that value.
Arkona co-founders Ryan Tansom and Pat Hobby are back to kick off the next theme: Demystifying Business Valuations. They explain the difference between intrinsic financial value and strategic transaction value and how they relate to normalized EBITDA, multiples, enterprise value, equity value, and finally how much money is going into your pocket after a sale (net proceeds). During this episode, Ryan and Pat unpack how companies are valued so you can begin to see–and run–your business like a financial asset.
WHAT YOU’LL LEARN:
– Why knowing the value of your company today is crucial to view–and run–your company as a financial asset.
– That intrinsic financial value +/- the purpose of the deal = strategic transaction value.
– Why the intrinsic value of a business is based on its cash flows.
– Why planning into the future using the intrinsic value of the company increases the options you will have when you actually want to sell.
– How to get a premium over the intrinsic financial value of a company.
– How the purpose of the deal and the buyer impact the transaction value.
– The difference between enterprise value, equity value, and net proceeds.
– How normalized (or adjusted) EBITDA works, how to calculate it, and why it matters.
– Why knowing the value of your company in real time helps you make decisions and in line with your long-term goals.
– The THREE numbers you should focus on in order to increase your net proceeds in the future when and if you decide to sell.
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// USE YOUR FINANCIALS TO CLARIFY YOUR PATH TO A MORE VALUABLE BUSINESS
Take the Intentional Growth Financial Assessment:
https://arkona.io/intentional-growth-financial-assessment
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