Adam Sand compares how private equity values companies at 4x profit multiples against what owner-operators keep. A $4M profit becomes a $16M acquisition price for PE, while an owner running a $5M revenue business keeps roughly $1M profit. He argues owner-led companies should invest in brand, Google reviews, local presence, and talent so they're too expensive to acquire and too hard to outspend.
So the way I kind of look at private equity right now is they look at a company that, say, earning a $4 million net profit, and they end up buying that for, say, 4x, probably not that much, but then that equals, like, say, $16 million. So what's your advantage? Well, if you're a company that, say, doing 5 million in revenue, well, you own all 5 million of your revenue. And what that might be is about a million dollars in profit. You own that. You didn't have to pay 5, 5 or $16 million to own that opportunity. Someone else had to go and invest $16 million. You've got a lot of fictitious extra capital to spend to compete. Yeah, you want to build the brand and be a strong regional player. The best position that you want to be in is where it is cheaper to buy than to compete with. So things like focusing on your Google reviews, focusing on your local presence, focusing on the domain authority of your website, driving into your SEO, getting really good at culture and talent.
