December 20, 2022

Take Five #037: “Congratulations, you have structured a deal that does not work” and more

Take Five #037: “Congratulations, you have structured a deal that does not work” and more

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Take Five #037: “Congratulations, you have structured a deal that does not work” and more

1. A common error in recent searchers: over-weighing financial due diligence, and completely discounting vetting deals on a more fundamental level.

2. Sell a cash-flowing business or swing for a VC-backed tech startup? One potential seller’s perspective

An interesting POV from an owner/operator who is debating selling, and their thoughts from running a production company for 5 years.

From /r/fatFIRE (a subreddit dedicated to the “Financial Independence, Retire Early” model for high-net worth individuals): “Sell a cash-flowing business or swing for a VC-backed tech startup?”:

A selection of choice comments (read the full post + comments here):

3. The 10 Financial KPIs you need to know to be the top 35% of businesses that survive

And in picture form:

4. “Congratulations, you have structured a deal that does not work.”

5. How to assess revenue quality and why recurring revenue is so highly valued by investors

Guesswork Invest does a great breakdown on Revenue Quality and why recurring revenue is so valuable:

Revenue Quality is clearly one of the most important elements of assessing business quality & downside risk.

I’ve written before about revenue quality, though that time I focused on defining it and how it impacted business valuation & cash flow.

But as I run my own business (which is primarily re-occurring revenue on a 2-5 year buying cycle), I think I missed explaining how different each type of revenue can “feel” when you’re running it. Specifically, whether your business feels like it “wants” to grow naturally, or if you have to will it to grow with ad spend & effort.

Today’s post is a bunch of math walking through that to hopefully turn these concepts into an intuitive muscle in your business diligence toolkit.

From “Big Deal Small Business: Revenue Quality (Again)” by Guesswork Invest

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