Ep. #2 [THEME THREE]

 

If you focus on growing the intrinsic financial value of your company (the value based on the risk of the cash flow), you can engineer the future valuation you want as long as you have enough time and capital–all while focusing on the right strategies that de-risk the company’s cash flow (therefore increasing the multiple) while increasing your normalized EBITDA. A lot of business owners don’t understand how intrinsic financial value works, but we haven’t done a deep dive on it yet. Until now.

 

Dave Diehl is back on the show. He is the CEO of Prairie Capital, a nationwide investment banking firm that specializes in helping business owners transition via ESOPs, management buyouts, and third party buyers. 

 

In this interview, Dave talks about the different types of risk within a company–from the financial buyer's view–and how an entrepreneur can lower that risk and, therefore, increase the valuation. He is the perfect guest for this topic because Prairie does 425+ ESOP valuation updates each year and works on countless transactions that are valued and structured based on the intrinsic valuation of the company. 

 

This episode is quite literally a treasure trail to help see your company's valuation through the eyes of a financial investor and understand how to increase the equity value over the course of a couple of years.

 

//WATCH THE INTERVIEW ON YOUTUBE: Intentional Growth™ Podcast

 

What You Will Learn

How a financial buyer perceives risk in a company.

Dave’s thoughts on the discounted cash flow (DCF) approach vs. the market approach to a valuation.

How a financial buyer views past cash flows compared to future projections and the weight they place on each when determining the value of a company.

The value of being able to tell the story of the business using the financials, answering questions, and how it all contributes to the trust a buyer has in a seller and their perception of risk.

Why focusing time on management and a future successor is something every entrepreneur needs to focus on.

Why the intrinsic financial value can only yield a certain valuation and how the deal structure and payoff proves that point.

What the capital stack approach to a valuation is and why it matters.

The market approach vs. a discounted cash flow model vs. a capital stack.

Why external events (like a pandemic) can affect your purchase price (even if you have done everything right).

What re-trading a deal is and how it can be dependent on the external economic climate.