How to Determine the Businesses You Want Equity In

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So the first thing is deciding how much equity you need to own. So this is you deciding what you need, not how you negotiate with them, although it does frame what you're going to ask for them. Right? So the easy way to do that is to use this equity percentage worksheet where you say, okay, what is the income goal that I've got? You divide that by the target EBITDA of the company. Now, this is where of the company that you're looking to work with. Now, the important thing here is we want to know what is their ebitda? Because we want to know how are we going to get our income? And if we know their ebitda, then we're able to determine if we have a percentage of that. Can we meet the income that we want? So if we were looking to say we want to make $120,000 a year from this particular client, and that's just pulled out of thin air. So a lot of people, I'd say most of the people I talk to in their first deal, they're thinking, you know, if I could get an extra $10,000 a month, that would be fairly amazing, right? That'd be really, really great. So if you're looking, if you're one of those people that says an extra $10,000 a month would actually move the needle for me, it would be really, really great. Then the target EBITDA of the company, let's say the target EBITDA of the company was a million two. Now, we don't know what it is because it's going to be different in every deal. But if it was a million two, we would just divide our goal of 120 into the million two, which would tell us that we need 10%. So on the very, very basic initial level of what do I think I need to get. This is it. Now, this doesn't have to be a single company. You could say my goal is to work up to $10,000 a month, and therefore, I'm going to. And I'm going to look at, you know, typically the companies that I work with make, let's say, $300,000 in profit per year. Well, what I would know at that point was if I wanted to get 120,000, then I could divide that by 10%. And, and say that means I need a million two. And then I could divide that by the 300,000 that the companies make, and that would tell me that I need to have four deals. Okay? So in this case, I would be saying, basically my goal is that I want 120k a year. And then if I could then say, okay, well, on average, I'm going to be asking for around 10% of a company, then I would divide that. I'd say your average equity ask. Now that would be something you would just be guessing at that average equity ask would be something you would be saying. I feel like in the industry it'd be pretty easy for me to get 10% for doing that. And we'll go into what percentages that you would. You should ask for in a little bit later in this presentation. So average equity percentage, let's say that that's 10%. Well, then we divide that out and we say that the total EBITDA pool needed is 1.2 million. Okay? So now we know basically we need to get 10% of the equity of 1.2 million in total clients to do this. So what I would then do is I would say, okay, how many client deals do I need? Then I'd say, okay, well, I need. I've got. My total ebitda needed is 1.2 million. And I would divide that by the average EBITDA of my client. So if my clients generally have now maybe one of them is doing 500,001 of them's doing 200,001 of them is doing 400,001 of them is doing 600,000, we would average that together and say, what's the average EBITDA? Typically, my clients are running about 300k, right? So then I would just divide the 1.2 total EBITDA pool that I need to get the 120,000 that I need. If I get 10% of that by 300,000, which is their average EBITDA, and that would tell me that I need four deals. So then I've got a goal, right? So now any of these numbers, because it's math, right, we can swap any of these things around to solve for whichever variable you want. We could solve for average equity. We could solve for your income goal. We could solve for, you know, as. As a reasonable estimation of what your income goal be. We could solve for the number of deals, which is what we did here. But this is, to me, very helpful number of deals needed. Because I think it's really important to have an idea of what Is the entity or the client that I'm looking to do these deals with. What is, what do they look like? This really helps that take shape for you. Right? So now I know that I can make $120,000 if I can get four deals in the income of my average client. Now, I'm not looking here at exit values or anything like that that will come as a result of doing this, but just kind of thinking about what is, what is the goal that I want. I feel like this can be a really good way to help you because then you can say, okay, I want to do this over the next 12 months. Then that means we've got 12 months divided by four deals that we need to make. Our goal means that we want to do one per quarter. Right? That's pretty cool. And then we can go and do our marketing math and say, well, typically I'm going to have to pitch, let's say, I mean, it shouldn't be a lot, but let's say that you have to pitch four people to get a deal. Well, now we know that each 30 days you're going to do one deal times four pitches. And if, if it takes 100 outreaches to get a pitch, then that tells us that we need to have 400 outreaches or marketing, you know, messages per quarter. And then we can go and divide that by three, which unfortunately doesn't come out to an easy number, but it's 133. That means basically I need 133 outreach messages per month. So I wanted to kind of run through that just because that's, to me, really how you get to. What do I need to be doing to hit my goal? Number one, you've got to have a goal. Because if you don't have it, you'll definitely get there. It's just we don't know what it's going to be. Right. If you've got the goal, and now we know that to get there we need to achieve X, then we can go back and say, well, okay, what do I have to do to actually get there?

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