KEN KIRSCHENBAUM, ESQ
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Comments on attrition and multiples
October 26 2022
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SAVE THE DATE: KIRSCHENBAUM & KIRSCHENBAUM ANNUAL HOLIDAY PARTY WILL BE ON DECEMBER 8, 2022. YOU'RE INVITED.
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Comments on attrition and multiples from article on October 14, 2022
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Ken
What Mitch doesn't point out about his take on attrition is that if the company is moving in a forward direction it could be the opposite of what he said. Company A with 15% attrition had $35,000 last year, $40,000 now and at current pace will have $47,000 next year even with the 15% attrition. Company B had $38,000 last year, $40,000 now, and at current pace will have $42,000 next year even with their $10% attrition. Company A could be considered to be worth more.
If someone were to buy only my active accounts on contract and not another single thing was included in the sale, then I would agree to lower the multiple adjusted for attrition. Selling the whole enchilada with techs and trucks and inventory and years worth of networking - No Way! not in a million years.
Buyers like to play it on the safe side, and they don't always like to discuss with us all of the opportunity they know they will have for growth and exactly how much money they will be making. They act like the only revenue they will receive after the sale is from those certain number of RMR payments, and we all know better.
Gary
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Ken
Really appreciate both of your comments on this and they are both good rules of thumb for buyers and sellers to consider!
Thank you!