Skip to main content

 

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. 

 

To save time, he started using a single letter beside each entry to represent the action he wanted to take:

 

P stood for “Plus,” something profitable, and he wanted more. 

U stood for “Unnecessary,” an expense he could eliminate. 

R stood for “Replaceable,” a cost that could be replaced with a better or cheaper option. 

E stood for “Equal” and was used for items that should be left untouched. 

 

Morin realized his shorthand notes could be organized into a memorable acronym he referred to as “PURE.”

 

Morin treated the PURE method like a game. Every month he scrutinized his P&L with the same four-letter system. Morin engaged his team to act on each item that needed improvement. He became obsessed with squeezing out a few more dollars of profit every month. 

 

His game worked. In 2020 Morin had bought out his business partner in a deal that valued the company at around $400,000. Two years later, after applying the PURE methodology of improving profitability, Morin sold Tabarnapp in an agreement that implied a roughly tenfold increase in the value of his business.

 

The Downside of Using Your Company’s Bank Account as a Slush Fund

 

There’s a downside to treating your company like your piggy bank. Co-mingling personal and business expenses while letting other costs go unchecked may help you reduce taxes in the short term but could end up costing you more in lost value when you decide to sell your business. Instead, keep your P&L “PURE” to jack up the value of your business. 

Location: Oceanside, CA, USA

Comments

Post a Comment

Popular posts from this blog

 What Does a Small Business Owner Do? A tiny business entrepreneur establishes a company. He/she defines the product or service, plans promotion, production, sales, and budgeting to make a profit. Small business operators recognize the significance of investment, credit, and a clear business plan. Solution providers are small business owners. He helps his nation's productivity and unemployment. The business owner also contributes to the economy and creates non-public sector jobs. He/she explores business's untapped mines by creating an invention that fits local needs. He/she matches the business's activity. Before establishing a firm, a small business owner knows the value of a business plan and feasibility studies. The owner must realize that he/she needs other people to work for the business to achieve its goal, so he/she recruits new hands to acquire all the support needed to take the business to the desired level. An associate campaign helps a small business owner marke...
Post a Comment
Read more

Core Values as a Growth Catalyst:

Core Values as a Growth Catalyst:  The $14 Million Journey of Sauceda Industries In the competitive third-party logistics (3PL) sector, Jay B Sauceda turned Sauceda Industries into a standout business, ultimately reaching $14 million in sales before being acquired by Cart.com. His secret weapon? His core values: “Yes, And,” “Explore More,” and “Give a Sh!t.” Talent Recruitment Sauceda found his first significant opportunity with Howler Brothers, the digitally native purveyor or stylish and rugged outdoor gear whose leadership related to Sauceda’s core values. Sauceda’s values weren’t mere posters on a wall but embedded into job descriptions, ensuring new hires were aligned with the company ethos. “Yes, And” fostered constructive dialogue, “Explore More” encouraged initiative, and “Give a Sh!t” signaled a commitment to quality. In the fiercely competitive landscape for hourly workers, Sauceda utilized job ads as both a magnet and a filter. His distinctive ads read: “We’re looking fo...
Post a Comment
Read more

"Boost Your Business with BNI: Networking Magic for Small Business Owners"

Are you a small business owner navigating the labyrinth of entrepreneurship? Do you sometimes feel like you're stranded on a deserted island, desperately waving your business flag, hoping someone will notice you? Well, fear not, because today we're diving headfirst into the world of Business Networking International, or BNI for short. It's like a secret society for small business owners, and it might just be the lifeline your business needs. **The BNI Basics: What's the Buzz All About?** Before we dive into the good stuff, let's break down the basics. BNI is not some mysterious cult (although it may seem that way sometimes). It's a global networking organization with chapters all around the world, dedicated to helping small business owners like yourself succeed. The goal is simple: refer business to one another. It's like a win-win pact with fellow entrepreneurs. You scratch their back, and they'll scratch yours – metaphorically, of course. **The 60-Seco...
Post a Comment
Read more