Andrew Gazdecki explains why buyers care more about profit than revenue. A $1 million revenue business making $600k profit is worth far more than a $2 million revenue business breaking even. To attract buyers and increase valuation, focus on cutting unnecessary expenses to boost profitability.
Chapters
Profitability is king in our market. Probably heard about profit multiples, revenue multiples. These are important indicators, whether you're on the buy side or the sell side, to help buyers really compare different deals on the market. Profit multiples weigh a lot more than revenue multiples and some of these other indicators.
If their business is not profitable, it can be so much harder to find a buyer compared to a profitable business. For example, if there's a SaaS business doing $2 million in revenue, but it's breakeven compared to a SaaS business that is doing $1 million in revenue, but $600,000 of that is profit. The profitable business will see enormous amount of interest compared to the nonprofit business. So the main takeaway is if you're thinking about selling your business at some point, start thinking about how you can make the business more profitable today. Are there certain expenses that you don't need? Because again, this is what every single buyer is going to look at, and this is really going to dictate how many buyers are interested, the final valuation, and really just if you can exit at all in
