Acquisition Collective
This Podcast is your go-to hub for buying, building, and scaling businesses—designed for entrepreneurs, professionals, and investors looking to escape the 9-to-5, gain financial freedom, and take control of their future through business acquisition.
Acquisition Collective
The First Thing I Check in Any Deal (It’s Not EBITDA)
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In this episode of Acquisition Collective, Jay Bourgana sits down with Johnny Chan on why smart buyers do not start with EBITDA when evaluating a deal. Most investors focus on EBITDA as the headline number, but experienced operators begin with the balance sheet to understand the real story. Johnny breaks down how the balance sheet reveals truth, while the P&L can mislead during business acquisition and due diligence.
They walk through how to assess cash flow, retained earnings, and hidden risks before trusting any EBITDA figure. This approach helps buyers avoid costly mistakes and build a disciplined process for business acquisition. If you want to improve your due diligence and think like a long term operator, this is where to start.
Clarity in cash flow and the balance sheet leads to better decisions than chasing EBITDA alone.
00:00 - Why Starting with EBITDA Leads to Bad Decisions
01:34 - Balance Sheet vs P&L: Truth vs Story
04:17 - Where EBITDA Goes: Cash, Debt, and Retained Earnings
05:12 - Common Manipulations: Revenue Pull Forward and AP Stretching
07:18 - Working Capital, Hidden Liabilities, and Red Flags
11:04 - What the Balance Sheet Reveals That P&L Hides
15:35 - Hidden Debt, Asset Risk, and One-Time Performance
22:07 - Capital Efficiency and Real Operating Metrics
26:56 - Inventory, Cash Flow Reality, and Profitability Tradeoffs
47:25 - Forecasting Growth, Working Capital Needs, and Final Takeaways
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Comment: what do you check before EBITDA in a deal?