Fantastic breakdown. Being the "cold shower" on social media is definitely not the way to grow a massive following. But having personally seen how destructive bad deals are and how easy it is to talk yourself into a bad deal by glossing over the details, this type of content is so valuable for serious investors
You created a solid information rebuttal for any would be investors who would fall for this guy with his creative accounting. The right following is more honest than the slight of hand this guy is trying to pull on his followers. Thank you for speaking out and for making this video.
@@DavidCBarnett exactly what we want. I've learnt that just because videos look good (i.e. good editing, motion graphics, HQ sound, HQ visual effects, good background, good make-up etc.), doesn't mean that the content creator knows what they're talking about. Big difference between a person trying to sell content and sometime trying to teach. Thanks for your solid and detailed content.
It was fantastically useful to see you actually break down a listing and work through the math! Please do these "case study" type videos on listings in different industries from time to time.
Good idea. BTW, I do this kind of thinkg a lot in the group coaching program at www.BusinessBuyerAdventure.com If you're in the market for a business, it's well worth the time/money. Cheers.
Ridiculously good video. More like this please. Hell - your next course could just be you breaking down companies like this and determining if the asking price is worth it and if not what you’d offer.
I am 100% in agreement with this comment. This one video was almost the equivalent of the BBA course, I'm not lying. I'm on my 3rd watch so I can really get it. But more break down vids would be gold. Like say... A manufacturing co. Hint hint I could strip the personal info so I'm not in violation of my NDA and send via email but I think this co would be a great example. Its one im considering. Or Do it as a paid consult and also use as a video. Lemme know.
I've watched quite a few video's on this genre and David seems to be the only one who has some integrity. He also doesn't charge an exorbitant amount for his program.
This was the first video I've ever watched on buying a business and I am so grateful. Really appreciate the lack of cheerleader hype and replacing it with actual business acumen.
Another well crafted episode, packed with solid info; you have out done yourself again, David! I still believe the "Fastest way to $500K income" is buying a business, or a collection of businesses. But having someone like David on your side, and a personal profile described at 54:20, will help a lot! I would only add that it's a journey, so just start (at a scale you can manage) and be prepared for lots of learning opportunities!
I like this guy a lot I have watched hundreds of business videos but David is easy to listen to and gives out great free advise ! Thank you for sharing !! 🔥🔥
Thanks for the lengthy discussion. I appreciate that you spent time at the end on realistic deprecation for maintaining and replacing the equipment and how it can negate the entire benefit/upside of the business existing in a marketplace where you cannot expand your margins.
Thanks. I've seen many people get into business because they had an immediate opportunity without ever considering long term investment and risk vs. reward.
I have been looking into buying a business w/ zero down for almost a year now and this is the first time anyone mentioned bankers structure this lending as an expansion to existing business not a standalone deal. Thanks for including this critical info David
Thoughtful analysis, great teacher for people like me, military veterans looking to acquire a business from retiring baby boomers transitioning out of their business. I’ll need YOU as an advisor to buy right.
So here’s my opinion on this: The business should be valued on a multiple of EV/(EBITDA minus future CAPEX minus corporate tax rate(assuming non pass through entity)) I would only pay a 2x multiple for a business like that. You said it would get sold for its equipment value, but the reality is that it would be sold at auction value which is usually only half the FMV of the equipment.
What knowledge and experience do I need to be able to buy a business? My husband and I manage to maintain our budget at a humble net positive. I really want to be able to build/buy a building. As it stands, I have the most of time. I am in university for a general business degree. How can I build myself a road map?🤔
Hi David, I am a fan now, great content. Apologies if you have already covered this, but how to search for a profitable business to buy? thanks for your reply.
Damn David, you are the man. I've been binge watching your content, and I'm going to purchase your courses afterwards. After watching you explain everything, I feel like I don't know what I'm doing. But I'm gonna learn. Thanks!
The country is infected with some combination of ignorance, overconfidence and idealism. I'm glad some adults are still in the room willing to help prevent everyone from slamming the foot on the gas and driving blindly off the cliff. Thanks David.
great content! a bunch of very practical analysis and advice, and then some life advice at the end for young people like myself - that's good stuff all around. thanks for this
Hey David. interested in buying a small business, gone through several content creators that hooked me with the deals like this one in your example, only to find they are unrealistic later on. Glad I found your channel that gives more realism to this process and its challenges. I checked out your website and like your 4 step process for the most part. I am disappointed though that the prices are what they are. It's probably worth every penny and more, however for first time business buyer currently working their w2 its simply irresponsible to spend thousands online. So many channels offer stuff like this and it's either a scam or not worth it. You've built trust in me because of your great videos, but after seeing the funnel to the website and prices I feel again like a fish trying to be hooked by another channel online. Have you ever considered screening people to pick out individuals you believe will be successful, giving them the tools to success upfront, and then sharing in the profits together after they succeed? I know that would really make someone stand out amongst the thousands of others online whose goal is to get people to buy their course. Lofty sentiment Im sure, but thank you for the info and taking the time to read
Great question and comment. I currently charge $300-$400/hr for consulting services on helping people to buy a business. My Business Buyer Advantage: Online Training program is about 15 hours long and costs $579 (at this time) which works out to $38/hr. I created it because I was always discussing the same concepts and topics with buyers. If that doesn't seem like a 'no brainer' for you, then you're likely not in a position to be buying a business right now. What I'd recommend is that you DO NOT enroll in this. Instead, lower your living expenses, save more money, build your resources and work on your business and leadership skills through reading books. If you go to www.amazon.com/shop/davidbarnett you'll find the books that I think are important and teach practical skills. When you're ready to invest tens or hundreds of thousands of dollars on a mature and profitable small business, then my products and fees will seem like cheap insurance to help make sure you're making the right decisions. Cheers and best of luck.
I came across your channel last year, and I just remembered it again now and watched this amazing video, incredible content all around. Do you still have the excel sheet? I recreated it while I watched along, but there's a couple cells that I'd like to verify the content of.
This is So Good 👍 I'm about to watch it for my third time. I'm literally about to meet with the owner of a Small street sweeping/ Parking lot pick up service on Monday to discuss investing in / Buying his business. This video may have stopped me from making some huge mistakes. I would love to pay for your consultation through this process. Great Work David! I'm Learning So much from your videos.
No. In Canada there are CSBFA loans from the big banks and credit unions. It's a gov't guarantee for tangible asset borrowing only, BDC can do cash flow loans. If the deal is big enough, some of the charter banks or special lenders like RoyNat will look at cash flow loans. SBA loans sound great, but the increased leverage leads to higher prices for businesses.
Well there's all kinds of other underwriting guidelines that would need to be in place but the program is often used to finance solid cash-flowing businesses for buyers with a 10% down payment, so you seem like you'd be a good candidate.
Nice video. However, don’t assume that all B2B contracts are low margin or that all companies are nimble enough to buy their own and do it themselves. Many companies in the USA are the opposite. Seen many pay above market rates for convenience and terms they want especially if they lack sufficient vendors who can meet their scope and terms.
Overpaying market rates is usually in response to some shortage or peak demand scenario. If the conditions persist, industry capacity will grow to meet the added demand and competition will bid out the need for overpayments.
Great business breakdown. Thanks! I learned a lot. Keep this coming please. I must say, I was a supervisor in a landscaping/lawn care business for 6 years and there are so many qualitative variables (not on a balance sheet or report) to factor into that can be a negative input to the qualitative metrics and bottom line. The industry cannot be that profitable because name more than two large national companies in this space?!! As large as this industry is, it is mostly small companies in the space because let's face it...there are no large margins here and for the most part no one is becoming a multi millionaire in this industry. Also keep in mind...someone is selling this company...why is that? Was it not making profit, was it too difficult, was it a dying star? The other side of the story is critical to assess.
Good points. I once listened to a lawn maintenance guy say that the average seasonal price for mowing a lawn hadn't really changed in 20 years while all the expenses had gone up. In some markets (my street for instance) these businesses have to compete with 12 year olds who have access to free gas (my son.)
@@DavidCBarnett One thing to keep an eye on is the introduction of industrial robotic electric lawn mowing. I think that has potential to change this industry for the better. Lower costs and more efficient.
@@kevin_brown_dc3423 I saw a robotic soccer field line maker working a few weeks ago. It was neat, but still required someone to be present. Interesting where all of this will go.
I think learning another language is as hard as learning business accounting and vise versa. How do you tackle this kind of information and becoming fluent in it if you are a dummy beginner searching for the opportunity to become an entry level business owner in order to begin the passive income adventure?
You start by developing industry knowledge in a specific sector and the easiest way to do that is by working in the sector. A 'beginner buying a business for passive income' will seem silly to you after you get a decade of experience in any industry.
Thank you so much for the upload and sharing very informative video. I think the post was focused on attention seeking. Lawnmowning and landscaping businesses are extremely competitive. Will like to know what the business competitive strategy is for boy scouts, local youth lawn care groups, etc.
Great info, thank you. It seems like most of the businesses on biz buy sell and places like that are likely distressed or failing hoping to find a newbie sucker to take it off their hands.
When it comes to the comment about buying a business zero down or overfinancing, I think I can interject my opinion as I fit the group of "young individuals" you were talking about at the end of the video, but I have done "zero-down" deals successfully. Basically from my experience, the main way a deal is done zero down is if there is a motivated party which allows for arbitrage between the WACC and ROI. For example, I'm working on a deal currently(not the buyer, but as a deal finder for the family office that's buying). The deal has an extremely motivated seller who for personal reasons needs to sell in the next few months and will basically take any offer that comes to them. We put in an IOI to acquire them for 10mm EV, Cash-Free/Debt-Free; they accepted it. When we got a valuation from a big four firm done it should that the business should be valued at 15mm. Because the seller is motivated we're able to buy under market value, hence get a high ROI. The ROI should've been 33.33% if valued at 15mm, but since we're getting it done at 10mm the ROI is 50%. We're already getting term sheets from (private)Mezz and (non-bank)Senior lenders and they are considering the 5mm difference as an equity injection which will allow us to do this zero down. So the difference between the fair market value of the business and the purchase price acts as the equity. Since you're an appraiser you are probably familiar with the terms fair market value, orderly liquidation value, and forced liquidation value. This is an example of buying a business below market value because the seller is basically selling for the equivalent of forced liquidation value due to their motivation to sell immediately. In this kind of scenario, the WACC from equity investors would likely be 33.33%, while at fair market value the ROI of the business is 33.33%, which makes sense as the ROI(should)=WACC in an efficient marketplace. The ONE AND ONLY way to get a true zero-down deal done is to find frictional, inefficient, illiquid markets, where either the seller is motivated, hence selling for a high ROI, or the investor is motivated to get capital out, hence giving capital out for a low WACC, and create value by making the arbitrage between the two. The difference between the WACC and ROI is the return you receive in a zero-down deal, and that is the "built-in equity" that allows a deal to get done. That's the only way that I view a zero down deal getting done; what are your thoughts, David?
There is a fed ex route for sale $555k nets $126k a year I want to buy it but I have no experience or money to buy it! I also thought of buying a pool service route locally or has a store too that sells chlorine and pool supplies
Something like that’s would only be worth 150k-175k due to the salary being taken on by the worker(you’re basically buying yourself a job), key man risk, and like David mentioned capital replacement.
Hmm interesting! Thanks! So where is a good place to find businesss for sale? I know of a pool route /supply store In my town mom and pop, has over 100 routes not sure if they would sell but maybe they would, was gonna hit them up as an interested buyer possibly
It is a high price but,the vehicle depreciation in FedEx route businesses allows you to offset the revenue stream from the business. IRS depreciation tables depreciate automobiles/vehicles over five years. This means that the value of each vehicle in your fleet reduces by 20% each year. In this way this business can be tax friendly.But i agree with David that the price is too high for 126k a year.
At 43:40 - this is an analysis on valuation multiples that I seldom hear from people. For anyone that uses valuation multiples and doesn't want to watch the entire video, do yourself a favor and at least watch 6 minutes or so between minute 40 to 46. Fantastic analysis David! Excluding equipment valuation that skews the multiple, I would also submit the idea that lower SDE creating higher valuations is due to the resultant price point. This happens with website businesses (where there's inherently no equipment), the lower the net income, the higher the multiples because there's so many more people that have $50k to buy a business than $5M to buy a business, which drives up competition (and therefore resultant valuations) on those lower SDE generating businesses.
Yes, there is another factor at play as well in those small online businesses... people confuse 'online business' with 'automatic business.' Many are paying top-dollar for something they think will be passive... they're not. I know many 50-hour/wk online biz owners.
It's the same thing, just online. I no longer draw a distinction between online vs. brick and mortar. It's just business. I see more and more 'online small businesses' with SDEs of $100K-$200K and they sell for the same types of prices under similar terms to real world businesses.
David, great overview. Lets take an alternative view.... Your customers are all utilities, the margins are tight (low) and the new buyer is successful in growing the business (most likely new utility companies). When does a margin constrained company with high capital cost goes bankrupt with new business? Too grow the business more capital is required in equipment, Utility companies take 60- 120 days to pay, so each new customers could propose $100K's of new receivables per month (working capital). Most likely consuming all the available working capital in receivables and the outcome would result in the failure to make timely payment of short term invoices (fuel, payroll, parts etc.). This is reputational sucide. Growth has issues, controlled growth is good, but capital restrained companies growth can be very bad. This opportunity sounds like a perfect storm of potential bad opportunities (tight capital and accelerated growth). Your input is welcomed.
I think your comments are all valid. This is a tough kind of business with the big capital expenses. It's like trucking. The people I know in trucking who make money do so by having the very best customers... or they're so big they have access to capital markets and so they can control the finance costs of all that steel.
In the investment and insurance worlds this kind of role would be called a 'correspondent.' ie someone tasked with authority to invest money on behalf of the investor. I guess it depends on whether you have the decision making power or not. This person could just as easily be a 'manager' or 'VP of development' if they were an employee of the investor. Maybe 'Business development and trading agent??"
Most commercial clients are NOT on Google looking for landscaping companies. At least not big major contracts. These people(Buyers) are ACTIVELY sought out by other Landing scaping companies. In other words, you gotta go to them. They are not coming to you.
I’m willing to bet that today you’d be more confident pulling off some complicated deals where both the buyer and seller are happy where as, when you first started brokering businesses, you likely had hi hopes but didn’t have the wisdom to navigate certain types of deals, those complicated ones that today would be a no brainer for ya… it’s easy to point out potential problems the seller will put up in a complicated deal, the questions are, how can both parties get what they want? How can we sweeten one side or the other given the constraints? What and how questions…
Maintenance costs on these 20 trucks?Oil change, tire replacements, spare parts, insurance ect. These expenses alone will sink the whole business since Depreciation cost does not include maintenance costs just the depreciating value of the sale price of the trucks.
Presumably the maintenance that is already being expensed would continue. However, I get your point. When people are short on cash they defer equipment replacement and it usually makes maintenance go even higher.
How much does a business need to generate in order for the owner to receive a $500k salary? Obviously there’s a small minority of business owners that reach this milestone. It requires grit and determination, you can just waltz into it. I suppose it doesn’t matter if you purchase or start a business. There’s something about an established business with either an existing customer base or at least consistent leads that can be converted to sales. The hardest part of any business is the execution after the sale is made and finding the right people/employees to scale the business and not having people management skills, project management skills, financial management skills. Although I think business buyers are more financially savvy than business starters.
Never trust anything so fantastical from social media. Such many fantastical assumptions on growth and one's own ability to outwit other long-established businesses and built on massive borrowing.
What I don't get is the obsession with EBITDA and SDE. For a small business, surely, you should be looking at either break-up value or, from the buyers perspective, the NPV of future cashflows. Of course, the latter is highly subjective. A particular buyer might have special skills or there might be synergies that buyer has available, which might not be available to anybody else. (And I know there are business-specific factors and individuals' motivations.)
NPV doesn't make sense in the small biz space because the leadership is being replaced. Why would you use NPV for investing in GM or Coca-Cola? Because you profit from the leadership there. When you buy a SMB, you're becoming the leadership, why pay someone else for the work you will do? The SDE or EBITDA is the demonstration of what the business should do. Future earnings may motivate the deal, but only a foolish buyer would buy on this expectation.
@@DavidCBarnett With regard to investing in large companies (assuming that you are buying a miniscule percentage of the shares) I would look at the dividend valuation model. Irrespective of how a buyer values a business, I would argue that every investment is motivated by future expectations, after all, why would anybody invest in anything unless they expected the outcome to be positive.
You should sit at the Investment Committee at a PE firm just tearing apart dealflow 😂 Great video David! Best regards, disgruntled associate at a PE firm
Enjoyed the video, however, your videos so far are talking me out of buying a business. I already have those people in my life. Will you ever make a video that recommends buying a business?
@@DavidCBarnett do your thing. Your videos are great. I've watched many of them and have learned a lot. You have helped me redirect my focus to my current business, building my cash flow, then using that collateral to buy a complimentary business in order to grow. I wouldn't have known this approach without your video. Thank you.
I find it astounding how many people assume the sales/revenue listed by a business - is considered the “truth” by buyers? Interested to know from actual buyers if this ever turned out to be the case?
The first step in any due-diligence is to add up the bank deposits for the year, adjust for any sales tax collected, then compare it to the sales figure. It never matches. But, then you know you need to figure out why.
Great video, David! Most of the young people you described want to buy a business because they want to be set for life - they feel the normal route doesn't work, or are in dire straits as is. They want to believe everyone who says how, "easy" it is to do without their own cash. Unfortunately they, nor the people they typically listen too, are very sophisticated in their approach. You HAVE to think of buying a business like an investment and not a means to get some desired lifestyle, because it IS an investment. Even if they could pull off what they want to do, which is to get an investor to fund the acquisition for them, they had best deliver. Otherwise they will find themselves very, very quick to not only be out of business but have a shoddy track record that other investors will be incredibly weary of.
Very good video, well done. I just don't understand one thing. 😅Where exactly was the method to build $500K in this example. The best case scenario we would get $100K (of which we all agree that the owner won't sell anyway😂). The only thing I could add is that you can introduce an earn out on a $to$ basis over $450K. Basically if the company ebitda gets to 500K you would pay additional 50K to the seller. Over 5 years (seller note) that's potentially another 250K if the company performs. I know that you said we shouldn't pay for the work we do, but to complete the first deal we could compromise a bit. Afterall the first deal is the hardest.
Yes, The whole 'plan' presented has many issues. The reason I did this video was because the thread got so many likes and shares but was generally nonsense. I want people to think before getting excited by this 'success porn.'
It is true, SBA allows as little as 5% down payment if you are buying a business that you currently do not own in that industry. SBA allows 100% financing if you're implementing a Roll Up Strategy. Two hurdles: the bank and the seller. The former because banks set there own standards on top of SBA (I know a few that will do it), and the latter because you'll need to convince them to wait for their interest until SBA is paid off. Neither impossible but not exactly easy either.
Hi David. First, excuse my English as it's my second language. I do like your videos, but have few problems with this one. First, you deducted depreciation twice: in EBITDA, then again at th end. Second, I think financing shouldn't be calculated like this. PE, if you had financing 7%@30 years you'd have some profit. So, maybe business isn't as bad. But certainly, it's not as good as Cody try to convince us. Best regards
EBITDA doesn't include deprectiation. I deducted labor then depreciation. Paying for this business over 30 years would mean you'd be replacing the machines twice while still paying the original cost of them. Doesn't make sense.
Oh this was a great one. Thanks, Dave. It's a bit like watching a new episode of a British thriller. From the beginning we know there is something wrong, but then innocent stuff unwinds and we see bullshit all over the place 😁 and every detail is important.
David,i just want to ask you only one thing,is it ever possible to buy a good business generating 500k income,have you seen any "happy" buyers???? because all i see is the negative content in every single industry 🤧
Sure you can. Most are picked up before they ever get onto a 'business for sale' website, however. Check out www.BusinessBuyerAdventure.com if you want to get in and learn how to source your own deals.
This is all great. But, I'm curious with the FED raising rates, and liquidity drying up, would it be wise to wait right now, and pick up businesses at a discount? I mean we should all pretty much be aware that low interest rates were pretty much driving everything. So waiting out the FED would be the best course of action, right now do you think?
There is no such thing as a 'market' for small businesses. They're all unique and so are the owners and the circumstances that lead to one going up for sale. Less liquidity may not mean lower prices, just different terms, in my experience.
@@DavidCBarnett I understand. My only concern out there now, is the saturation, I mean with multiple Trillions that was injected into the economy, there was never real organic growth (it was simply borrowing from future productivity), it was debt based growth. So now that the liquidity is drying up fast, does the last 10+ years of FED injection really matter when valuing any company today, when we can see rates rising fast to counter these rapid price / valuation increases. I agree that every business is unique, but buying a company today based on past artificial growth, and then expecting that growth to continue at the same pace wouldn't necessarily an accurate estimation when valuing a company today as well as moving forward into a slowdown. I remember 2008 very well, and most companies sales dropped off rapidly from one day to the next.
@@dalihbt Have you done Business Buyer Advantage? There is a whole module about buying in a recession with many tools and methods to manage this kind of risk. If you think there is a risk of sales dropping, ie a lawn maintenance company faces the threat of people doing it themselves, then you anticipate the threat and create a deal structure that shares back this risk with the seller. We don't price future growth into acquisiton in the small biz space because the future is up to you to create. When times are uncertain, the lack of bank financing actually helps buyers position these defensive purchase structures.
It's sometimes used with house flippers... I'll give you your asking price if you'll lend me more than it's currently worth. Essentially the seller becomes a silent investor.
Fantastic breakdown. Being the "cold shower" on social media is definitely not the way to grow a massive following. But having personally seen how destructive bad deals are and how easy it is to talk yourself into a bad deal by glossing over the details, this type of content is so valuable for serious investors
Thanks Lapp. I've never tried to grow a massive following. Just the right following.
You created a solid information rebuttal for any would be investors who would fall for this guy with his creative accounting. The right following is more honest than the slight of hand this guy is trying to pull on his followers. Thank you for speaking out and for making this video.
@@DavidCBarnett exactly what we want. I've learnt that just because videos look good (i.e. good editing, motion graphics, HQ sound, HQ visual effects, good background, good make-up etc.), doesn't mean that the content creator knows what they're talking about. Big difference between a person trying to sell content and sometime trying to teach. Thanks for your solid and detailed content.
It was fantastically useful to see you actually break down a listing and work through the math! Please do these "case study" type videos on listings in different industries from time to time.
Good idea. BTW, I do this kind of thinkg a lot in the group coaching program at www.BusinessBuyerAdventure.com If you're in the market for a business, it's well worth the time/money. Cheers.
Ridiculously good video. More like this please. Hell - your next course could just be you breaking down companies like this and determining if the asking price is worth it and if not what you’d offer.
I am 100% in agreement with this comment. This one video was almost the equivalent of the BBA course, I'm not lying. I'm on my 3rd watch so I can really get it. But more break down vids would be gold. Like say... A manufacturing co. Hint hint I could strip the personal info so I'm not in violation of my NDA and send via email but I think this co would be a great example. Its one im considering. Or Do it as a paid consult and also use as a video. Lemme know.
@@1realtruthrightnow742 I would be interested in that service as well
I've watched quite a few video's on this genre and David seems to be the only one who has some integrity. He also doesn't charge an exorbitant amount for his program.
thanks man!
This was the first video I've ever watched on buying a business and I am so grateful. Really appreciate the lack of cheerleader hype and replacing it with actual business acumen.
Yes, I look awful in a cheerleader outfit ;)
Absolutely brilliant!!! Subscribed, saved and shared. Heading for your website now.
Awesome, thank you!
Another well crafted episode, packed with solid info; you have out done yourself again, David!
I still believe the "Fastest way to $500K income" is buying a business, or a collection of businesses. But having someone like David on your side, and a personal profile described at 54:20, will help a lot!
I would only add that it's a journey, so just start (at a scale you can manage) and be prepared for lots of learning opportunities!
True.
Thank you so much David. Second video of yours for me. You cut through the bs and I appreciate it!
With a chainsaw!
That was literally the best 55 minutes I have spent driving to work in I don't know how long. Can't wait to check out the full course!
Thanks Patrick
I loved this so much. So happy I found this channel.
Great to have you Lydia.
Thank you so much for sharing your knowledge. I appreciate how sincere you are to help people who don’t have a deep knowledge about buying a business.
I just don't want people to get hurt. I've seen it too many times.
@@DavidCBarnett we need more people like you who actually creates contents to sincerely help people not to make money for themselves. So thank you 👏
New viewer here. First video I've seen of you. Love the depth.
Welcome aboard!
You have one of the best analysis videos on business, I get to learn so much from your channel.
Thanks man, I appreciate that.
I like this guy a lot I have watched hundreds of business videos but David is easy to listen to and gives out great free advise ! Thank you for sharing !! 🔥🔥
Glad you like them Jordan.
Thanks for the lengthy discussion.
I appreciate that you spent time at the end on realistic deprecation for maintaining and replacing the equipment and how it can negate the entire benefit/upside of the business existing in a marketplace where you cannot expand your margins.
Thanks. I've seen many people get into business because they had an immediate opportunity without ever considering long term investment and risk vs. reward.
Excellent video. Hard to believe it was free. Thank you. Signing up for your business buyer advantage.
Awesome!
Very Good. One of the best Videos I have seen on buying a business. Thank you for sharing.
Glad you enjoyed it!
I have been looking into buying a business w/ zero down for almost a year now and this is the first time anyone mentioned bankers structure this lending as an expansion to existing business not a standalone deal. Thanks for including this critical info David
Check out all the videos and posts on this site: www.investlocalbook.com/p/buy-business-with-no-money.html Cheers
This breakdown was very valuable. Thank you. Would enjoy seeing more of these breakdowns.
Glad you enjoyed it!
I never comment, anywhere.
Thank your sooooo much for this.
Just subscribed for your newsletter.
Thank you for watching! Welcome aboard.
The email he refers to is at www.DavidCBarnettList.com for all the rest of you!
Thoughtful analysis, great teacher for people like me, military veterans looking to acquire a business from retiring baby boomers transitioning out of their business. I’ll need YOU as an advisor to buy right.
Thanks Tom & Lindsay!
Amazing breakdown. Thank you.
Glad it was helpful!
Excellent video. What do you think is more efficient and profiting the fastest, buying businesses, or becoming the silent partner?
I love the long video deep dive format!
Thanks, I was surprised how long this took.
So here’s my opinion on this:
The business should be valued on a multiple of EV/(EBITDA minus future CAPEX minus corporate tax rate(assuming non pass through entity))
I would only pay a 2x multiple for a business like that.
You said it would get sold for its equipment value, but the reality is that it would be sold at auction value which is usually only half the FMV of the equipment.
Any discount codes available?
I rarely do promos, but when I do, it’s only put out on the email list. Sign up at www.DavidCBarnettList.com
Professor Barnett, excellent case study analysis. This is like Harvard for small business education. More please!
Thanks John
What knowledge and experience do I need to be able to buy a business? My husband and I manage to maintain our budget at a humble net positive. I really want to be able to build/buy a building. As it stands, I have the most of time. I am in university for a general business degree. How can I build myself a road map?🤔
Great suggestion for a video. It's on the list.
Incredibly interesting and well explained video! Thank you
Glad you liked it!
Hi David, I am a fan now, great content. Apologies if you have already covered this, but how to search for a profitable business to buy? thanks for your reply.
Great suggestion!
Damn David, you are the man. I've been binge watching your content, and I'm going to purchase your courses afterwards. After watching you explain everything, I feel like I don't know what I'm doing. But I'm gonna learn. Thanks!
That's the Dunning Kruger effect. Now that you see it in yourself, you can start to really build your competence.
Can you do a breakdown of a successful acquisition of a middle market business?
Such a good video, I learned a lot, thank you!
Glad it was helpful!
Another amazing video from Mr. Barnett. Best consistent business advice I have found anywhere.
I appreciate that!
The country is infected with some combination of ignorance, overconfidence and idealism. I'm glad some adults are still in the room willing to help prevent everyone from slamming the foot on the gas and driving blindly off the cliff. Thanks David.
I like your writing style!
Very glad to find you David. This one video was more helpful than a $600 course I recently completed.
My course is only $449. www.BusinessBuyerAdvantage.com ;) Cheers!
Amazing video, thanks for this great breakdown! Super valuable.
Glad it was helpful!
great content! a bunch of very practical analysis and advice, and then some life advice at the end for young people like myself - that's good stuff all around. thanks for this
Glad you enjoyed it!
I would like to buy Cleaners in GA wjat should I be looking for?
(
What)
A copy of the Yellow Pages. You'll find them all in there.
Hey David. interested in buying a small business, gone through several content creators that hooked me with the deals like this one in your example, only to find they are unrealistic later on. Glad I found your channel that gives more realism to this process and its challenges. I checked out your website and like your 4 step process for the most part.
I am disappointed though that the prices are what they are. It's probably worth every penny and more, however for first time business buyer currently working their w2 its simply irresponsible to spend thousands online. So many channels offer stuff like this and it's either a scam or not worth it.
You've built trust in me because of your great videos, but after seeing the funnel to the website and prices I feel again like a fish trying to be hooked by another channel online.
Have you ever considered screening people to pick out individuals you believe will be successful, giving them the tools to success upfront, and then sharing in the profits together after they succeed?
I know that would really make someone stand out amongst the thousands of others online whose goal is to get people to buy their course.
Lofty sentiment Im sure, but thank you for the info and taking the time to read
Great question and comment.
I currently charge $300-$400/hr for consulting services on helping people to buy a business.
My Business Buyer Advantage: Online Training program is about 15 hours long and costs $579 (at this time) which works out to $38/hr.
I created it because I was always discussing the same concepts and topics with buyers.
If that doesn't seem like a 'no brainer' for you, then you're likely not in a position to be buying a business right now.
What I'd recommend is that you DO NOT enroll in this.
Instead, lower your living expenses, save more money, build your resources and work on your business and leadership skills through reading books.
If you go to www.amazon.com/shop/davidbarnett you'll find the books that I think are important and teach practical skills.
When you're ready to invest tens or hundreds of thousands of dollars on a mature and profitable small business, then my products and fees will seem like cheap insurance to help make sure you're making the right decisions.
Cheers and best of luck.
I came across your channel last year, and I just remembered it again now and watched this amazing video, incredible content all around.
Do you still have the excel sheet? I recreated it while I watched along, but there's a couple cells that I'd like to verify the content of.
This is So Good 👍 I'm about to watch it for my third time. I'm literally about to meet with the owner of a Small street sweeping/ Parking lot pick up service on Monday to discuss investing in / Buying his business. This video may have stopped me from making some huge mistakes. I would love to pay for your consultation through this process. Great Work David! I'm Learning So much from your videos.
Sure, just go to www.CallDavidBarnett.com to book a zoom or Clarity call with me.
good analysis - you should do more of these - thanks!
I'll keep my eye out for them.
Great job of breaking it down
Thanks.
Must see video for new business buyers
Thanks Antonsiu
David, is there such a thing as an SBA loan in Canada ?
No. In Canada there are CSBFA loans from the big banks and credit unions. It's a gov't guarantee for tangible asset borrowing only, BDC can do cash flow loans. If the deal is big enough, some of the charter banks or special lenders like RoyNat will look at cash flow loans.
SBA loans sound great, but the increased leverage leads to higher prices for businesses.
I have a question. If I have 300k in liquid funds, and want to finance with SBA for 500k-600k will SBA appove the loan?
Well there's all kinds of other underwriting guidelines that would need to be in place but the program is often used to finance solid cash-flowing businesses for buyers with a 10% down payment, so you seem like you'd be a good candidate.
Massive value here David. thanks.
Thanks Rowan
Nice video. However, don’t assume that all B2B contracts are low margin or that all companies are nimble enough to buy their own and do it themselves.
Many companies in the USA are the opposite. Seen many pay above market rates for convenience and terms they want especially if they lack sufficient vendors who can meet their scope and terms.
Overpaying market rates is usually in response to some shortage or peak demand scenario. If the conditions persist, industry capacity will grow to meet the added demand and competition will bid out the need for overpayments.
I love your channel! Please do more of these as I want to buy a business to help me in retirement I need a mentor too
If I see more of these, I'll do them.
Nice analysis. Thanks
You're welcome
Dave, you’re a surgeon! Great video.
Thank you kindly. I started to work this one out because I doubted my first instinct.
Interestingly the RUclips ad before this video is about getting rid of credit card debt. I never got it before.
Interesting. Some videos do get ads but I've requested to block 'get rich quick.'
Great business breakdown. Thanks! I learned a lot. Keep this coming please. I must say, I was a supervisor in a landscaping/lawn care business for 6 years and there are so many qualitative variables (not on a balance sheet or report) to factor into that can be a negative input to the qualitative metrics and bottom line. The industry cannot be that profitable because name more than two large national companies in this space?!! As large as this industry is, it is mostly small companies in the space because let's face it...there are no large margins here and for the most part no one is becoming a multi millionaire in this industry. Also keep in mind...someone is selling this company...why is that? Was it not making profit, was it too difficult, was it a dying star? The other side of the story is critical to assess.
Good points. I once listened to a lawn maintenance guy say that the average seasonal price for mowing a lawn hadn't really changed in 20 years while all the expenses had gone up. In some markets (my street for instance) these businesses have to compete with 12 year olds who have access to free gas (my son.)
@@DavidCBarnett One thing to keep an eye on is the introduction of industrial robotic electric lawn mowing. I think that has potential to change this industry for the better. Lower costs and more efficient.
@@kevin_brown_dc3423 I saw a robotic soccer field line maker working a few weeks ago. It was neat, but still required someone to be present. Interesting where all of this will go.
I think learning another language is as hard as learning business accounting and vise versa. How do you tackle this kind of information and becoming fluent in it if you are a dummy beginner searching for the opportunity to become an entry level business owner in order to begin the passive income adventure?
You start by developing industry knowledge in a specific sector and the easiest way to do that is by working in the sector. A 'beginner buying a business for passive income' will seem silly to you after you get a decade of experience in any industry.
Thank you so much for the upload and sharing very informative video.
I think the post was focused on attention seeking. Lawnmowning and landscaping businesses are extremely competitive. Will like to know what the business competitive strategy is for boy scouts, local youth lawn care groups, etc.
Glad it was helpful!
I shared this with some of my homies who fancy themselves businessmen. I haven't shared it with the others bc they dont deserve it.
LOL!
Great info, thank you. It seems like most of the businesses on biz buy sell and places like that are likely distressed or failing hoping to find a newbie sucker to take it off their hands.
Good ones do hit the marketplaces but they don't last. A well-priced business has many offers quickly.
When it comes to the comment about buying a business zero down or overfinancing, I think I can interject my opinion as I fit the group of "young individuals" you were talking about at the end of the video, but I have done "zero-down" deals successfully.
Basically from my experience, the main way a deal is done zero down is if there is a motivated party which allows for arbitrage between the WACC and ROI.
For example, I'm working on a deal currently(not the buyer, but as a deal finder for the family office that's buying). The deal has an extremely motivated seller who for personal reasons needs to sell in the next few months and will basically take any offer that comes to them. We put in an IOI to acquire them for 10mm EV, Cash-Free/Debt-Free; they accepted it. When we got a valuation from a big four firm done it should that the business should be valued at 15mm. Because the seller is motivated we're able to buy under market value, hence get a high ROI. The ROI should've been 33.33% if valued at 15mm, but since we're getting it done at 10mm the ROI is 50%. We're already getting term sheets from (private)Mezz and (non-bank)Senior lenders and they are considering the 5mm difference as an equity injection which will allow us to do this zero down. So the difference between the fair market value of the business and the purchase price acts as the equity.
Since you're an appraiser you are probably familiar with the terms fair market value, orderly liquidation value, and forced liquidation value. This is an example of buying a business below market value because the seller is basically selling for the equivalent of forced liquidation value due to their motivation to sell immediately.
In this kind of scenario, the WACC from equity investors would likely be 33.33%, while at fair market value the ROI of the business is 33.33%, which makes sense as the ROI(should)=WACC in an efficient marketplace.
The ONE AND ONLY way to get a true zero-down deal done is to find frictional, inefficient, illiquid markets, where either the seller is motivated, hence selling for a high ROI, or the investor is motivated to get capital out, hence giving capital out for a low WACC, and create value by making the arbitrage between the two. The difference between the WACC and ROI is the return you receive in a zero-down deal, and that is the "built-in equity" that allows a deal to get done.
That's the only way that I view a zero down deal getting done; what are your thoughts, David?
Romil, I would REALLY like to talk with you. Email would be best. I'm trying to get a zero down deal done
@@1realtruthrightnow742
Sure what’s your email?
Are you the Operator of the business or are you hiring an Operator?
There is a fed ex route for sale $555k nets $126k a year I want to buy it but I have no experience or money to buy it! I also thought of buying a pool service route locally or has a store too that sells chlorine and pool supplies
That's too high a price. That $126 is likely SDE and ignores capital replacement and in that business, it's significant.
Something like that’s would only be worth 150k-175k due to the salary being taken on by the worker(you’re basically buying yourself a job), key man risk, and like David mentioned capital replacement.
Hmm interesting! Thanks! So where is a good place to find businesss for sale? I know of a pool route /supply store In my town mom and pop, has over 100 routes not sure if they would sell but maybe they would, was gonna hit them up as an interested buyer possibly
It is a high price but,the vehicle depreciation in FedEx route businesses allows you to offset the revenue stream from the business. IRS depreciation tables depreciate automobiles/vehicles over five years. This means that the value of each vehicle in your fleet reduces by 20% each year.
In this way this business can be tax friendly.But i agree with David that the price is too high for 126k a year.
At 43:40 - this is an analysis on valuation multiples that I seldom hear from people. For anyone that uses valuation multiples and doesn't want to watch the entire video, do yourself a favor and at least watch 6 minutes or so between minute 40 to 46. Fantastic analysis David! Excluding equipment valuation that skews the multiple, I would also submit the idea that lower SDE creating higher valuations is due to the resultant price point. This happens with website businesses (where there's inherently no equipment), the lower the net income, the higher the multiples because there's so many more people that have $50k to buy a business than $5M to buy a business, which drives up competition (and therefore resultant valuations) on those lower SDE generating businesses.
Yes, there is another factor at play as well in those small online businesses... people confuse 'online business' with 'automatic business.' Many are paying top-dollar for something they think will be passive... they're not. I know many 50-hour/wk online biz owners.
How do you feel about ecommerce business in comaprison with “typicall” small businesses like pizza shops
It's the same thing, just online. I no longer draw a distinction between online vs. brick and mortar. It's just business. I see more and more 'online small businesses' with SDEs of $100K-$200K and they sell for the same types of prices under similar terms to real world businesses.
David, great overview. Lets take an alternative view.... Your customers are all utilities, the margins are tight (low) and the new buyer is successful in growing the business (most likely new utility companies). When does a margin constrained company with high capital cost goes bankrupt with new business? Too grow the business more capital is required in equipment, Utility companies take 60- 120 days to pay, so each new customers could propose $100K's of new receivables per month (working capital). Most likely consuming all the available working capital in receivables and the outcome would result in the failure to make timely payment of short term invoices (fuel, payroll, parts etc.). This is reputational sucide. Growth has issues, controlled growth is good, but capital restrained companies growth can be very bad. This opportunity sounds like a perfect storm of potential bad opportunities (tight capital and accelerated growth). Your input is welcomed.
I think your comments are all valid. This is a tough kind of business with the big capital expenses. It's like trucking. The people I know in trucking who make money do so by having the very best customers... or they're so big they have access to capital markets and so they can control the finance costs of all that steel.
Thank you
You're welcome
What do you call someone who buys/sells business on behalf of client AND builds businesses for this client/investor??
In the investment and insurance worlds this kind of role would be called a 'correspondent.' ie someone tasked with authority to invest money on behalf of the investor. I guess it depends on whether you have the decision making power or not. This person could just as easily be a 'manager' or 'VP of development' if they were an employee of the investor. Maybe 'Business development and trading agent??"
Usually a broker dealer
Most commercial clients are NOT on Google looking for landscaping companies. At least not big major contracts. These people(Buyers) are ACTIVELY sought out by other Landing scaping companies. In other words, you gotta go to them. They are not coming to you.
Yup, it's a sales effort.
I’m willing to bet that today you’d be more confident pulling off some complicated deals where both the buyer and seller are happy where as, when you first started brokering businesses, you likely had hi hopes but didn’t have the wisdom to navigate certain types of deals, those complicated ones that today would be a no brainer for ya… it’s easy to point out potential problems the seller will put up in a complicated deal, the questions are, how can both parties get what they want? How can we sweeten one side or the other given the constraints? What and how questions…
No question, there is value in experience.
Maintenance costs on these 20 trucks?Oil change, tire replacements, spare parts, insurance ect. These expenses alone will sink the whole business since Depreciation cost does not include maintenance costs just the depreciating value of the sale price of the trucks.
Presumably the maintenance that is already being expensed would continue. However, I get your point. When people are short on cash they defer equipment replacement and it usually makes maintenance go even higher.
Impressive approach!
It's just hype.
Amazing Info!!!
Thanks Jason
Great material!
Thanks Krizzio
Lol "the internet has opinions." Thank you for opening my eyes to how weird it is to talk about it that way.
Words shape thoughts!
How much does a business need to generate in order for the owner to receive a $500k salary? Obviously there’s a small minority of business owners that reach this milestone. It requires grit and determination, you can just waltz into it. I suppose it doesn’t matter if you purchase or start a business. There’s something about an established business with either an existing customer base or at least consistent leads that can be converted to sales. The hardest part of any business is the execution after the sale is made and finding the right people/employees to scale the business and not having people management skills, project management skills, financial management skills. Although I think business buyers are more financially savvy than business starters.
Typically, to generate this kind of income for the owner, the business would need sales of $2.5-$5M.
Never trust anything so fantastical from social media. Such many fantastical assumptions on growth and one's own ability to outwit other long-established businesses and built on massive borrowing.
Western culture loves leverage. It's worked for two generations... What could go wrong?
What I don't get is the obsession with EBITDA and SDE.
For a small business, surely, you should be looking at either break-up value or, from the buyers perspective, the NPV of future cashflows. Of course, the latter is highly subjective. A particular buyer might have special skills or there might be synergies that buyer has available, which might not be available to anybody else. (And I know there are business-specific factors and individuals' motivations.)
NPV doesn't make sense in the small biz space because the leadership is being replaced. Why would you use NPV for investing in GM or Coca-Cola? Because you profit from the leadership there. When you buy a SMB, you're becoming the leadership, why pay someone else for the work you will do? The SDE or EBITDA is the demonstration of what the business should do. Future earnings may motivate the deal, but only a foolish buyer would buy on this expectation.
@@DavidCBarnett With regard to investing in large companies (assuming that you are buying a miniscule percentage of the shares) I would look at the dividend valuation model.
Irrespective of how a buyer values a business, I would argue that every investment is motivated by future expectations, after all, why would anybody invest in anything unless they expected the outcome to be positive.
This is amazing content.
Thanks Grant.
You should sit at the Investment Committee at a PE firm just tearing apart dealflow 😂 Great video David! Best regards, disgruntled associate at a PE firm
I can only imagine what those meetings are like.
Enjoyed the video, however, your videos so far are talking me out of buying a business. I already have those people in my life. Will you ever make a video that recommends buying a business?
I've made many. Maybe I'll sip some optimism before my next recording. Nobody likes a Negative Nelly eh?
@@DavidCBarnett do your thing. Your videos are great. I've watched many of them and have learned a lot. You have helped me redirect my focus to my current business, building my cash flow, then using that collateral to buy a complimentary business in order to grow. I wouldn't have known this approach without your video. Thank you.
I find it astounding how many people assume the sales/revenue listed by a business - is considered the “truth” by buyers? Interested to know from actual buyers if this ever turned out to be the case?
The first step in any due-diligence is to add up the bank deposits for the year, adjust for any sales tax collected, then compare it to the sales figure. It never matches. But, then you know you need to figure out why.
What is EBTA?
EBITDA
earnings before interest tax depreciation amortization
You need to sign up for Business Buyer Advantage! www.BusinessBuyerAdvantage.com Cheers
Fantastic video
Thanks Peter
Did you ever do a case study on a gas station for an average price?
I have not. Might be a good one for the video list.
I think he should go for more residential since it’s only 3% right now
good Story.
Many many thanks
Their is a big difference between what goes on in business school and what happens in real world..... not everyone can be called an expert
Totally!
Awesome!!!!
Thanks!!
I love TRANSPARENCY ❤️
Thanks
Brilliant!
Glad you live it.
Great video, David! Most of the young people you described want to buy a business because they want to be set for life - they feel the normal route doesn't work, or are in dire straits as is. They want to believe everyone who says how, "easy" it is to do without their own cash.
Unfortunately they, nor the people they typically listen too, are very sophisticated in their approach. You HAVE to think of buying a business like an investment and not a means to get some desired lifestyle, because it IS an investment. Even if they could pull off what they want to do, which is to get an investor to fund the acquisition for them, they had best deliver. Otherwise they will find themselves very, very quick to not only be out of business but have a shoddy track record that other investors will be incredibly weary of.
Excellent point about business reputation.
Very good video, well done. I just don't understand one thing. 😅Where exactly was the method to build $500K in this example. The best case scenario we would get $100K (of which we all agree that the owner won't sell anyway😂). The only thing I could add is that you can introduce an earn out on a $to$ basis over $450K. Basically if the company ebitda gets to 500K you would pay additional 50K to the seller. Over 5 years (seller note) that's potentially another 250K if the company performs. I know that you said we shouldn't pay for the work we do, but to complete the first deal we could compromise a bit. Afterall the first deal is the hardest.
Yes, The whole 'plan' presented has many issues. The reason I did this video was because the thread got so many likes and shares but was generally nonsense. I want people to think before getting excited by this 'success porn.'
It is true, SBA allows as little as 5% down payment if you are buying a business that you currently do not own in that industry. SBA allows 100% financing if you're implementing a Roll Up Strategy. Two hurdles: the bank and the seller. The former because banks set there own standards on top of SBA (I know a few that will do it), and the latter because you'll need to convince them to wait for their interest until SBA is paid off. Neither impossible but not exactly easy either.
Great comments.
Hi David. First, excuse my English as it's my second language. I do like your videos, but have few problems with this one. First, you deducted depreciation twice: in EBITDA, then again at th end. Second, I think financing shouldn't be calculated like this. PE, if you had financing 7%@30 years you'd have some profit. So, maybe business isn't as bad. But certainly, it's not as good as Cody try to convince us. Best regards
EBITDA doesn't include deprectiation. I deducted labor then depreciation.
Paying for this business over 30 years would mean you'd be replacing the machines twice while still paying the original cost of them. Doesn't make sense.
Excellent analysis. Paying extra for an artificially rosy outlook is a very common pitfall of wanna-be entrepreneurs.
Yes, don't fall in love with what 'could be.'
Oh this was a great one. Thanks, Dave. It's a bit like watching a new episode of a British thriller. From the beginning we know there is something wrong, but then innocent stuff unwinds and we see bullshit all over the place 😁 and every detail is important.
Thanks, I needed the spreadsheet to unwind it all.
You got a new view after watching this
Welcome aboard!
David,i just want to ask you only one thing,is it ever possible to buy a good business generating 500k income,have you seen any "happy" buyers???? because all i see is the negative content in every single industry 🤧
Sure you can. Most are picked up before they ever get onto a 'business for sale' website, however. Check out www.BusinessBuyerAdventure.com if you want to get in and learn how to source your own deals.
@@DavidCBarnett where can I find that business??did any of your mentees did that(500k-1M income)?
So what’s the fastest way to a 500k income?
Not sure. But, not this.
@@DavidCBarnett good answer.
This is all great. But, I'm curious with the FED raising rates, and liquidity drying up, would it be wise to wait right now, and pick up businesses at a discount? I mean we should all pretty much be aware that low interest rates were pretty much driving everything. So waiting out the FED would be the best course of action, right now do you think?
There is no such thing as a 'market' for small businesses. They're all unique and so are the owners and the circumstances that lead to one going up for sale. Less liquidity may not mean lower prices, just different terms, in my experience.
@@DavidCBarnett I understand. My only concern out there now, is the saturation, I mean with multiple Trillions that was injected into the economy, there was never real organic growth (it was simply borrowing from future productivity), it was debt based growth. So now that the liquidity is drying up fast, does the last 10+ years of FED injection really matter when valuing any company today, when we can see rates rising fast to counter these rapid price / valuation increases. I agree that every business is unique, but buying a company today based on past artificial growth, and then expecting that growth to continue at the same pace wouldn't necessarily an accurate estimation when valuing a company today as well as moving forward into a slowdown. I remember 2008 very well, and most companies sales dropped off rapidly from one day to the next.
@@dalihbt Have you done Business Buyer Advantage? There is a whole module about buying in a recession with many tools and methods to manage this kind of risk. If you think there is a risk of sales dropping, ie a lawn maintenance company faces the threat of people doing it themselves, then you anticipate the threat and create a deal structure that shares back this risk with the seller. We don't price future growth into acquisiton in the small biz space because the future is up to you to create. When times are uncertain, the lack of bank financing actually helps buyers position these defensive purchase structures.
@@DavidCBarnett Great. thanks for the information! Yeah having cash on hand is definitely going to be an advantage.
I suspect he calls out two different owner finance loans because he's not going to tell the SBA about the bigger one.
A 'secret second' seller note? hmmm.
It's sometimes used with house flippers... I'll give you your asking price if you'll lend me more than it's currently worth. Essentially the seller becomes a silent investor.
EBUDuh means what for us newbies? LoL
Earnings Before Interest Taxes Depreciation and Amortization. EBITDA