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“I think there is something magical about a million dollars in terms of showing the progress and scalability of the business,” says Laura Held, a partner at investment firm Shamrock Capital. She says $1 million in revenue before EBITDA — interest, taxes, depreciation and amortization — is a notable metric that makes her known to everyone from angel investors to debt financiers.
Marilyn Adler, founder and managing partner at Mizzen Capital – a group that invests debt in lower middle market companies that typically generate EBITDA of $1 million to $10 million – says $1 million EBITDA is the minimum, that a company needs to achieve in order for them to achieve it. In most cases they even consider financing them. She says it's also typically the minimum required to be of interest to a private equity group looking for add-on acquisitions. (This is where a buyer acquires a smaller business to integrate with an existing business – called a platform business – to make it more profitable or productive.) For example, the owner of a pharmacy chain might acquire a courier company to deliver medicines. “The $1 million EBITDA seems to be a deciding factor for them to invest time in it and make it really worthwhile,” says Adler.
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Create your very own Auto Publish News/Blog Site and Earn Passive Income in Just 4 Easy Steps
