Paying Attention to Valuation Can Build a Profitable Business

In a time when every penny counts, why is it that many owners fail to stay on top of maintaining the highest value possible for their companies? Our industry is not shy when it comes to communicating details of the various mergers and acquisitions that take place. It is unfortunate that even with all the valuable information available nowadays, many are still enamored with multiples of gross RMR. This is the number that everyone wants to focus on, including how trade publications and companies report the valuation of a sale. 

The RMR multiple is a number that is always reflected upon whether a company is profitable or not.  Well in some cases, especially portfolio sales, this is still true. In the case where owners are seeking to build real value, as well as sell their organizations and/or assets at a real premium, then a multiple of RMR is not the answer.

The old fashion fundamentals of building a company that produces free cash, profitability and builds equity on a daily basis is the recipe for creating a great return. Take a look at the most recent example with Stanley’s bid to acquire Niscayah. It’s one thing to build valuable RMR; it’s a whole other matter to build an organization that builds RMR while producing profitable installation revenue. This is where owners will receive the greatest return on their investments.

Maintaining the profitability is the first step. Building a creditable company that is meaningful and has real structure, along with the profitability, is what will allow you to attract buyers who are willing to pay you a premium multiple of your EBITDA. It’s important to pay attention to these factors every day.  Make your decisions accordingly, and make sure that your business has greater value when your head hits the pillow at night than it did when you woke up that morning.


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About the Author


Peter Giacalone is President of Giacalone Associates, an independent security consulting firm.

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