As a business owner, you juggle multiple tasks: managing a team, handling clients, bringing in new leads and making sure projects run smoothly. Among these, one critical responsibility is often neglected: ensuring profitability. We think about, worry about and hope for profit but often don’t do anything to actually improve net profit.
In my last article, I defined EBITDA as net profit adjusted to make it more useful for business valuation. To estimate a company’s value, valuers multiply EBITDA by a number called the “multiple.” The result is the estimated value of the company. For example, a company with an annual EBITDA of $500,000 and a multiple of 2 has a value of $1 million.
There are conventional practices for valuing a business that informed buyers and sellers generally follow. One of those is valuing a business as a multiple of its net annual profit expressed in a form called EBITDA.
Net working capital is one of the most important measures of a company’s health because it indicates the ability to pay debts on time.
When you’re on a journey, you need a starting point and a destination to be successful. In business, we use key performance indicators to map out those points and improve profitability.
As a coach, I’ve witnessed a lot of suffering in business. Some of it is normal and transient, but a lot is persistent.
Have you ever opened the bank app on your phone and thought: “That can’t be right. We should have more cash than that”?
“I make money, so why don’t I have any?” Anyone who has been in business for a significant time has asked that question, usually in response to a cash crisis such as the inability to make payroll.
Why do people discount their prices? I’ve asked hundreds of business owners and managers that question, and the answers are always the same.
Breakeven is too important to ignore. There are many uses for breakeven. It is a fundamentally important tool with the power to transform your thinking and the quality of your business decisions.
Spa retailers, did you know: If you raise prices 1%, you will increase your net profits 14.5%? If you increase sales 20%, you will double your net profit? If you improve your gross profit margins by 5%, you will increase your net profit 71%? If you raise your prices 10%, you can lose 22% of…
None of us became business owners so we could keep books and read financial statements. Nevertheless, both are critical to running a successful business. We can’t even approach our full potential without them.