The Purest Way to Increase the Value of Your Business

Picture a magic slot machine. Each time you pull the arm, you make back a multiple of whatever you wagered. How much time would you devote to cranking that arm?

When it comes to the value of your business, you can make many bets, but only one has a virtually guaranteed return. Most companies are valued on a multiple of earnings before interest, taxes, depreciation, and amortization (EBITDA), so every dollar of incremental profit you earn in the short term will translate into a multiple of that down the road.

Since most acquirers look at three years’ worth of financial reporting, squeezing out every extra dollar of profit makes even more sense if you’re considering an ownership transition in the next thirty-six months.

How Derek Morin Jacked Up the Value of His Business

For an example of a founder obsessed with finding every dollar of profit available, let’s look at Derek Morin. Morin founded Tabarnapp to create after-market sales applications for Shopify website owners.

The business was a success, but when his partner, who handled finance, left the company, Morin was forced to look closely at his profit & loss (P&L) statement. Morin saw potential improvements, so he made notes in the margin next to each line item he wanted to change.