From $10 million to $40 million in 5 years
What might your strategy need to look like to grow your company valuation four-fold in 5 years? And what would your role be in pulling something like this off? Wouldn’t it be great if you could achieve this level of success? Having pulled off something as daring as this, what conversations would you be hearing 6 years from now sitting around the campfire with your mates?
This article will be of interest to most business people running successful businesses with an EBITDA of $2 million or more.
The people that have achieved this level of success are no different to you or I. Their business might have had some different base components to the business you are operating today, but then again maybe you are running the perfect business that could achieve a four-fold increase in valuation in 5 years. So what do you want to do?
“How you live your days is how you live your lives” is one of the many great philosophies shared in the book Fierce Conversations by Susan Scott. It’s my belief that if you have a company that is worth $10 million today, then the chances are that if you desired it, that you can create a $40 million company in 5 years.
$30 million uplift in value. How could that come about? There are three elements:
- The multiple could jump from 5X to 8X EBITDA.
- The profits could increase by $3m – if the EBITDA was $2m today (5 X $2m = $10m), then the EBITDA would need to be $5m (8 X $5m = $40m) in 5 years times.
- You focus on achieving more with every step-change in business activity – the 80 / 20 rule – higher gross margin percentage, higher net profit percentage, higher ROI, higher ROA, etc, etc
Can you start to see how all your years of experience (say 20-30 years) that got you to this point might actually have been the training ground for a better next phase (of only 5 years)?
Yes, you will need more people. There is $30 million upside so it might be worth investing a few million dollars in a great management team over 5 years.
Yes, you might need more cash than you have available and that will involve selling a stake in your company. But, So what? If you cannot afford to unlock the $30 million, then I’ve got news for you, you never had the $30 million extra so you’re not giving up anything.
Yes, you might get busier, but I kind of think that you will fill your days being busier on more interesting stuff. So, I don’t buy the busier argument. You will be doing different things and different will lead to a huge share of $40 million. Go for it.