By: Wesley Legg As healthy companies grow, they generally see margins expand as fixed costs are diluted with increased sales or as the company gains pricing power. Therefore, compressing margins can be a leading indicator of issues arising within a business. Perhaps a business has not invested sufficiently in R&D, so their technology is becoming obsolete….
By: Billy Pritchard What is Deferred Revenue? If a software company offers its customers the ability to prepay on longer-term contracts, Deferred Revenue becomes an important consideration during the transaction process. Generally, a prepayment from the customer creates a future liability for that company to service the customer over the life or term of the…
By: Zane Tarence Companies are generally valued based on their risk adjusted future cash flows. Therefore as cash flows increase (bottom line), the value of the company increases. Normally companies are valued as a multiple of this bottom line, EBITDA (earnings before interest, tax, depreciation, and amortization). If a company generates $10mm in EBITDA and…
By: Wesley Legg A lifestyle company is a business operated with the purpose of providing a level of income or particular lifestyle for its founder. There is nothing wrong with having a lifestyle company, but the founder/entrepreneur must understand that the “lifestyle company” mentality does not fully align with building enterprise value or creation of…
By: Wesley Legg Customer concentration is a notorious deal killer, yet many business owners fail to address this issue prior to pursuing a recapitalization or exit. After all, from an owner’s perspective, landing one household name as a client could be exactly what an up-and-coming company needs to build its credibility in the industry, boost…
By: Brad Johnson “How large is your market, and what is your share of it?” If you haven’t been asked this question yet, you can certainly expect it if you ever consider any sort of transaction. This is one of the most common questions from both strategic and financial buyers, yet we typically find that…