EBITDA Multiplier!


 

At Executive Outliers, We help executives, buyers and investors build EBITDA and Equity fast. 

For examples, check out our latest blog Article,

Recession-Proof: Doing more with less!

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The Secret to Business Value

Process

Business Systems

Technology

vision2-scale-economy
Tech multiplier

EBITDA Growth

industry-change-disruption
Systems x Tech = BV

EBITDA Multiplier

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is one of the ways banks, investors, and buyers may assess the value of an organization.  Simplified the formula for business value (BV) is,

EBITDA * EBITDA Multiplier = Business Value

For a financial expert, business value (BV) is a mathematical algorithm.  An algorithm that gives the wise investor and understanding of,

Potential Growth vs. Potential Risk

Each investor has a personal risk tolerance level.  When putting money into a business, the investor wants to understand the likelihood that the investment will increase in value after the sale.  The investor can perform a risk vs. growth analysis.

Technology, the missing risk variable

Henry Ford wasn’t the inventor of the automobile.  Nor was he the first to produce cars.  Plus, he was not the inventor of the assembly line.  In his time, each was a new technology or business system.  Henry Ford used the assembly line to quietly and gradually improve employee productivity.  For the next 19 years (1908 to 1927), the purchase price of a Model-T went down from $850 to $300.  The reduction in cost came as production time, on the model-T, reduced from 12.5 hours in 1908, to 24 seconds in 1927. 

In 1889, 485 companies were building automobiles with a total production of 2500 motor vehicles.  In 1908 the norm in the auto industry was one car and one builder.  Those companies that followed this master craftsman model of car production could not scale to match the 19-year production level of 15 million model-Ts.

If you had been an investor in 1908, which of the 485 companies would you have invested?  Those companies following a proven industry norm, or the company that later sold 50% of the cars sold worldwide in 1927?  The difference was Henry Ford was investing in innovation.  Innovation in business process and technology. 

Technology does two things,

  • Reduces the cost of Earnings
  • Reduces business risk

What we find is that technology is an EBITDA multiplier.  A modern business leader said,

The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency.” Bill Gates

An exclusive focus on only technology or only an efficient operation is not enough.  Arguably, if the business process determines EBITDA. Then technology determines the EBITDA multiplier in the calculation of business value.

What can Executive Outliers do for you?

We believe that what worked for Ford in the 1920, also works for businesses, like Microsoft, today.  This combination of building efficient business operations, then magnifying those operational efficiencies with technology is what we bring to the business calculation.  Of course there is no one way, each client determines their own risk vs. growth calculation. 

The key is understanding our clients risk tolerance and Growth requirements.

We are experts at aligning business processes with technology.  Our vision is to grow our clients, EBITDA and business value in the fastest possible time. 

If this seems interesting to you, learn more about us.

Recession-Proof IT: Doing more with less

Contact us directly when you are ready to make a change.

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* We study the business executives that were the outliers of their time (like Sun Tzu, Henry Ford, Jack Welch, Bill Gates and many others).  This is why we named our company, Executive Outliers.  We understand that not every CEO wants to be an industry leader.  For those that are looking for a competitive edge we find it may be just a quick tweak to your technology or a business process.  Our record; 4 billable hours that needs $30,000 of addition income, measured in 6 weeks.

What would you do with an extra $30,000 dollars/Month ($360,000/year and a 1.2 Million increase in EBITDA business value)?

 

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