Don't Be Fooled By EBITDA - EP. 32

Don't Be Fooled By EBITDA - EP. 32

Author: Brad Johnson January 17, 2019 Duration: 13:41

Today we’re talking about an incredibly important topic: the dangers of mistaking EBITDA with Cash Flow.


It’s so tempting when you’re looking at a lot of these small businesses to buy and you see this metric called EBITDA and you think, “Hey, this is how much cash I’m going to have distributed at the end of the year to my investors.” But looks can be deceiving. 


So in this episode, we want to explain to you why this is so crucial when evaluating businesses, red flags to look out for, and how to resolve this potential conflict. We also give some examples on why exactly it is so important not to mistakes EBITDA with Cash Flow and how depreciation and amortization can get you into trouble.


Key Takeaways:

[:46] About today’s topic.

[1:36] What EBITDA is.

[2:21] An example of how EBITDA comes into play when buying a small business.

[4:47] Another example of why it is crucial to not mistake EBITDA with Cash Flow.

[6:49] Another way depreciation and amortization can get you into trouble.

[9:11] How to resolve this potential conflict: look at the Cash Flow statement!

[11:18] Bottom line: be very careful when you’re evaluating a small business and you’re just looking at the EBITDA.

[11:38] Particular businesses you want to be especially careful of.

[12:06] What are some red flags?


Mentioned in this Episode:

EBITDA

Cash Flow

CPA

PNL


For More on The Alternative Investor, Check Out:

TheAlternativeInvestorShow.com


Hosted on Acast. See acast.com/privacy for more information.


For those looking beyond the ticker symbols, The Alternative Investor explores the tangible and often complex world of assets that don't trade on a public exchange. Host Brad Johnson, drawing from his experience at Evergreen Capital, believes a well-rounded portfolio often exists outside the daily noise of the stock market. This podcast digs into the practicalities of private equity, real estate, venture capital, and other non-traditional avenues. While these opportunities can offer different paths to growth, they come with their own unique set of questions and due diligence. Each conversation is geared towards demystifying that process. You'll hear detailed discussions on how these investments actually work, the structures involved, and the long-term mindset they require. The aim isn't to offer quick tips, but to provide a clearer framework for evaluation. Johnson breaks down real-world cases and strategies, focusing on the critical factors that can influence an outcome. It’s a resource for anyone considering how to allocate capital towards assets that aren’t as easily quoted or sold, with the understanding that higher potential returns often walk hand-in-hand with increased complexity. Tune in for a straightforward take on building resilience and potential through alternative holdings.
Author: Language: English Episodes: 50

The Alternative Investor
Podcast Episodes
The Biggest Bet Ever Made: Do You Own Too Much Tech? [not-audio_url] [/not-audio_url]

Duration: 12:49
Should You Diversify Away From Tech? The Massive AI Capex Bet and Key Red FlagsBook a Callhttps://zpr.io/W6JaycaP8EeTEvergreen Capitalinfo@evergreencap.comThe script addresses investors heavily concentrated in technology…
How the New Fed Chair Could Change Investing [not-audio_url] [/not-audio_url]

Duration: 9:42
The Fed Put May Be Ending: How a Warsh-Led Regime Change Could Reshape InvestingBook a Callhttps://zpr.io/W6JaycaP8EeTEvergreen Capitalinfo@evergreencap.comThe Fed Put May Be Ending: How a Warsh-Led Regime Change Could R…
How Business Owners Create Passive Income After An Exit [not-audio_url] [/not-audio_url]

Duration: 10:19
Episode DescriptionIn this episode, Brad Johnson explains how business owners can turn the proceeds from selling a company or experiencing a major liquidity event into passive monthly income that can fund retirement inde…
My 10 Worst Real Estate Nightmares [not-audio_url] [/not-audio_url]

Duration: 7:08
In this episode, Brad Johnson shares ten real-world real estate nightmares that show why rental properties are far from passive. Drawing from over $150 million of investment experience, he walks through costly mistakes,…
The Biggest Mistakes Dividend Investors Make [not-audio_url] [/not-audio_url]

Duration: 10:36
In this episode, Brad Johnson breaks down the biggest mistakes dividend investors make and why chasing high yield can quietly hurt long-term results. He explains what dividend investors should actually focus on, how to i…
The Truth Behind The Financial Advisor Industry [not-audio_url] [/not-audio_url]

Duration: 35:05
In this episode, Brad Johnson explains how the financial advice industry actually works behind the scenes. He breaks down how most advisors are paid, where conflicts of interest can appear, and why many portfolios still…
Bill Ackman’s $1 Billion Sale (GP Stakes Case Study) [not-audio_url] [/not-audio_url]

Duration: 6:53
In this episode, Brad Johnson breaks down the recent news of Bill Ackman selling 10% of his hedge fund, Pershing Square, highlighting the strategic reasons behind this move and its implications for GP stakes investing. D…
$0 to $11K/Month Passive Income: Why Doctors Love Real Estate [not-audio_url] [/not-audio_url]

Duration: 34:32
In This Episode, You’ll Learn:The Wake-Up Call: Why a surgeon’s salary wasn't enough to solve financial burnout.The Hybrid Approach: How to balance index funds with high-yield real estate.The First Deal: A breakdown of J…
Are You Outgrowing Your Financial Advisor? [not-audio_url] [/not-audio_url]

Duration: 5:54
Sign up to access our deal flow: https://altinvestor.beehiiv.com/To speak with our team: info@evergreencap.comThis episode challenges the common belief that family offices are only for billionaires, explaining how wealth…