For many entrepreneurs, the thought of building a successful company and eventually selling it for millions of dollars represents the entrepreneurial dream. You can increase the likelihood of achieving this goal by taking specific steps to prepare your company for a successful merger and acquisitions transaction. The following tips represent the steps I took to […]
Earnings before interest taxes depreciation and amortization
Pitfalls Around Earnouts (and Why They Rarely Payout)
Following up on Lesson #145, Issues to Consider Before Selling to Big Companies, I wanted to drill down deeper on earnouts and potential pitfalls to avoid, as earnouts rarely payout as expected. First of all, what is an earnout? An earnout is typically a performance-based payment that has been agreed to be paid to selling shareholders, above and beyond any […]
How to Research Industry Valuation Multiples
As we learned back in Lesson #32 (How to Value Your Startup), in order to properly value your own business, you need to have a good sense to valuations for similar companies in your industry. To accomplish this, you will need to research the ever-changing industry-average revenue or EBITDA multipliers for similar companies in your industry, determined either […]
10 Rules of Thumb for Startup Investment Valuation
Once you have a potential investor excited about your team, your product and your company, the investor will inevitably ask, “What is your company’s valuation?” Many entrepreneurs stumble at this point (losing the deal or most of their ownership) by having no answer and saying, “Make me an offer” or quoting an exorbitant number. I’ve […]
Why Big Companies Struggle With Innovation
As I have been doing startup consulting at Red Rocket, I have also had many executive conversations with several big companies. These companies were anywhere from $150 million to $25 billion in revenues in size, definitely well established businesses in their respective industries. One thing has become perfectly clear in all cases: once a company gets to a certain […]