Scot
Salad Dressing Empire
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Just playing devil's advocate -- while you're most likely right that the $20M business is more attractive, I can certainly imagine situations where the 100% of $1M is better positioned.
The questions I would ask are:
- How much cash is each business throwing off?
- Besides cash, what is the 49% partner providing to the company?
- How liquid is the business (can you easily sell it for the current valuation)?
- What is the earnings multiple that generated the valuation?
- What are similar businesses in the industry worth (closer to $1M or closer to $20M)?
- Could you easily grow the business to the point that you could get the same $20M at a higher valuation (lower equity offering) in the near term?
The most important factor is lifestyle. Would you be much happier having full control of a smaller business or would you be much happier having a larger business where you share control?
Again, you're mostly likely right...but it's always worth considering everything...
And that’s the big distinction. As @LittleWolfie has mentioned in his intro thread, he doesn’t want a big exit or $10m in the bank. For him, 100% control of a $1m business is ideal.
However, I plan on a 5-7 exit. I plan on following the MJ model of, build it big and profitable and sell it off to the highest bidder, invest wisely and retire. For me, 51% of $10m is the ideal.
So, it all comes down onto what your endgame is.