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Nikonomics - The Economics of Small Business
102 - EBITDA vs. SDE: What Every Business Buyer Needs to Know with Dennis Unrein
Dec 30, 2024
Dennis Unrein, a micro VC and founder of Private Ventures Group, shares insights on the evolving landscape of private equity focused on small businesses. He discusses the crucial differences between EBITDA and SDE metrics, helping buyers make informed decisions. Dennis highlights the unique opportunities in acquiring retiring baby boomer-owned businesses, particularly in niche industries like elderly care and telecommunications. The conversation also covers the benefits of self-funded searches and how Special Purpose Vehicles can simplify investments.
42:20
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Quick takeaways
- The podcast outlines the distinction between EBITDA and SDE metrics, emphasizing their importance in guiding smart acquisition decisions for business buyers.
- A growing interest in acquiring retiring baby boomer-owned businesses reveals unique opportunities in niche markets like elderly care and telecommunications testing.
Deep dives
Investment Focus in Private Equity and Venture Capital
The discussion highlights the fundamental differences between venture capital and private equity investment models. Venture capital generally targets early-stage companies with the expectation that a small percentage will yield high returns, thereby employing a portfolio approach. In contrast, private equity focuses on established businesses with solid cash flow, typically requiring investors to expect a return of their investment rather than high-risk ventures. The conversation emphasizes a specialized approach in the private equity sector, concentrating on smaller enterprises—specifically those with a total enterprise value below $10 million—allowing individual investors a unique market access unavailable to larger institutional players.
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