Private Companies Vs Public Companies ROI
Generally, publicly-traded companies sell for multiples several times greater than that of privately held companies. Much of this has to do with the size and risk differential though with stock prices fairly high, and risk just as high, for the first time ever investors may get a better deal out of private company purchases. Even if you have to risk it all.
Multiples
Browse BizBuySell.com for any extended period of time and you’ll soon find something very interesting. First, there should be more than a few businesses for sale in your area. In my area, there’s a diner, an electrician business, a national ad for some turnkey health care nonsense, and then a pizza business.
With the exception of the “turnkey opportunity,” every single one of these operations sell for less than three times income (the cheapest being 1.5x annual income) and all of them have a “key employee” in place that handles all the day to day operations. What does that mean? Unlike most businesses, these are investments, you’re not buying a job.
Investing in Your Own Company
There’s a case to be made for investing in your own business, and hoping to make a retirement out of it. One of the reasons entrepreneurship has been so popular is because it first provides an income, and then it provides a nest egg when the owner cashes out.
Of course there’s also a case for risk. What if the company goes broke? Do you have the time to run a business and go about your daily life?
If you can handle it, go for it. The returns have never been better at a minimum of 33% per year and
the risk is always as high as it is today. Of course, the downside is that you’ll lose it all. But is that not true with any investment?
