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Notes -
Is there? Typically the 500k profit includes the full-time labor of the owner. You can't just hire a manager to take care of it. Many businesses have idiosyncratic challenges.
Simple businesses or large business will command a higher multiple. Maybe. As far as I know, PE firms that do business acquisition have target IRRs of at least 20% – usually much higher. So that would imply that they are not paying large multiples either.
PE funds pay large multiples depending on the type of business. But 3x net income is cheap. Keep in mind leverage super charges equity return. If I pay 10x EBITDA for a 50m EBITDA biz but borrow 50% then even with the same multiple if I can increase EBITDA from 50m to 65m and sell within 3 years the EV is 650m of which 400m is equity. So I have a 150m profit on my 250m return.
I take your point re the labor cost.
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