Right sizing the first purchase

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by a searcher from University of Pennsylvania - The Wharton School
in San Francisco, CA, USA

1yr ago

Right sizing the first purchase

Perhaps it is already discussed but thought I ask - how does one right size the first purchase? Do you maximize leverage or is value the driver?

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reply by a searcher 1yr ago
from Brigham Young University in Lehi, UT, USA

balance leverage and value. use enough debt to enhance returns but prioritize a solid, predictable cash flow to reduce risk. Aim for a deal size you can confidently operate and grow, even with less leverage.

reply by a searcher 1yr ago
from University of Glasgow in Edinburgh, UK

I believe both leverage and valuation are important - the former to ensure you are optimizing the use of your available capital, the latter to ensure you don't add more debt to a business than the cashflow can sustain, The other element is finding a business of sufficient size that it has enough employees to operate somewhat autonomously - in that context, it's likely that going smaller will make things more difficult for you.