reply
by a searcher
1yr ago
from Princeton University
in Annandale, Clinton Township, NJ, USA
Bigger almost always better in the small business acquisition world. Here's the rationale: To grow any business, you need good people to help you do it. Let's say you need to hire someone competent, capable, and energetic to tackle some avenue for new growth. In a $500k EBITDA business, you pay someone an $80k salary, and with overhead and benefits they cost $100k all in. You just lost 20% of your EBITDA with one hire, and you don't even know if its the right fit. In a $1mm EBITDA business, you can pay someone $120k base salary, all in cost $150k. Much higher quality candidate. Your hit to EBITDA is 15%. This illustration scales the bigger the business gets. Many other reasons bigger tends to be better (more established, more resilient/redundency in place, etc).