{"id":561266,"date":"2015-03-12T21:11:29","date_gmt":"2015-03-13T01:11:29","guid":{"rendered":"https:\/\/vrbbd.wpengine.com\/vrbbgreenbay\/two-similar-companies-big-difference-value\/"},"modified":"2022-01-31T12:43:57","modified_gmt":"2022-01-31T17:43:57","slug":"two-similar-companies-big-difference-value","status":"publish","type":"post","link":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/two-similar-companies-big-difference-value\/","title":{"rendered":"Two Similar Companies ~ Big Difference in Value"},"content":{"rendered":"<p>Consider two different companies in virtually the same industry.\u00a0Both companies have an EBITDA of $6 million \u2013 but, they have\u00a0very different valuations. One is valued at five times EBITDA,\u00a0pricing it at $30 million. The other is valued at seven times\u00a0EBITDA, making it $42 million. What\u2019s the difference?<\/p>\n<p>One can look at the usual checklist for the answer, such as:<\/p>\n<ul>\n<li>The Market<\/li>\n<li>Management\/Employees<\/li>\n<li>Uniqueness\/Proprietary<\/li>\n<li>Systems\/Controls<\/li>\n<li>Revenue Size<\/li>\n<li>Profitability<\/li>\n<li>Regional\/Global Distribution<\/li>\n<li>Capital Equipment Requirements<\/li>\n<li>Intangibles (brand\/patents\/etc.)<\/li>\n<li>Growth Rate<\/li>\n<\/ul>\n<p>There is the key, at the very end of the checklist \u2013 the growth\u00a0rate. This value driver is a major consideration when buyers\u00a0are considering value. For example, the seven times EBITDA\u00a0company has a growth rate of 50 percent, while the five times EBITDA company has a growth rate of only 12 percent. In order\u00a0to arrive at the real growth story, some important questions\u00a0need to be answered. For example:<\/p>\n<ul>\n<li>Are the company\u2019s projections believable?<\/li>\n<li>Where is the growth coming from?<\/li>\n<li>What services\/products are creating the growth?<\/li>\n<li>Where are the customers coming from to support the\u00a0projected growth \u2013 and why?<\/li>\n<li>Are there long-term contracts in place?<\/li>\n<li>How reliable are the contracts\/orders?<\/li>\n<\/ul>\n<p>The difference in value usually lies somewhere in the\u00a0company\u2019s growth rate!<\/p>\n<p><em>\u00a9 Copyright 2015 <a href=\"https:\/\/wrightco.net\">Business Brokerage Press, Inc.<\/a><\/em><\/p>\n<p><em>Photo Credit: <a href=\"https:\/\/www.morguefile.com\/creative\/jeltovski\">jeltovski<\/a>\u00a0via <a href=\"https:\/\/www.morguefile.com\/\">morgueFile<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Consider two different companies in virtually the same industry.\u00a0Both companies have an EBITDA of $6 million \u2013 but, they have\u00a0very different valuations. One is valued at five times EBITDA,\u00a0pricing it at $30 million. The other is valued at seven times\u00a0EBITDA, making it $42 million. What\u2019s the difference? One can look at the usual checklist for [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":561267,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[4,5,3,10],"tags":[],"class_list":["post-561266","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-buyer-articles","category-seller-articles","category-valuation"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/posts\/561266","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/comments?post=561266"}],"version-history":[{"count":0,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/posts\/561266\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/media\/561267"}],"wp:attachment":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/media?parent=561266"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/categories?post=561266"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/tags?post=561266"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}