Podcast Summary: "8 Items To Look Out For When Analyzing A Small Business"

Podcast: Action Academy | Millionaire Mentorship For Your Life & Business
Host: Brian Luebben
Episode Date: September 22, 2025

Episode Overview

Brian Luebben, the host of Action Academy, dives deep into the fundamentals of small business underwriting—breaking down the exact metrics and KPIs you must examine when analyzing a potential business acquisition. The episode is a practical guide, translating thousands of dollars’ worth of mentorship and seminar training into an actionable checklist for anyone seeking to buy, build, or sell a small business. Brian also shares real examples and applies these lessons to his own company, making it candid, relatable, and highly actionable for listeners aiming to generate cash flow outside of corporate America.

Key Discussion Points & Insights

1. The Foundation of Business Analysis (02:00-03:00)

• Revenue & EBITDA: The two key headline financials for any business listing.
  • "At the very top you have revenue and you have EBITDA... So that's your top line, like how much money are you making and what is your net?" (03:00, Brian)
• EBITDA Explained: Earnings Before Interest, Taxes, Depreciation, and Amortization—a proxy for net profit.
  • Brian acknowledges the jargon and keeps it practical: "That's a freaking hell of a word. I hate that word. So I'll just say EBITDA instead, it sounds smarter." (03:16, Brian)
• Multiples: Businesses are commonly valued as a multiple of EBITDA (for larger firms) or SDE—Seller’s Discretionary Earnings (for smaller firms).

2. Value Adders: Metrics That Increase Business Value (03:30-06:44)

Brian highlights the "value adders"—the factors private equity firms and savvy buyers seek out:

• Revenue Growth Percentage (YoY)
  • "How much is your business growing? Is it growing or shrinking? Yearly revenue retention, how much of your revenue is kept going into the next year? So pretty easy, right? (04:00, Brian)
• Revenue Retention
  • Recurring revenue is king; high retention boosts multiples.
• EBITDA Margin (Profit Margin)
• LTV to CAC Ratio (Lifetime Value to Customer Acquisition Cost)
  • "This is the single most important business metric that they track... LTV is making your customer more valuable and the CAC is getting more customers." (05:00, Brian)
  • Action Academy example: "Our current LTV to CAC ratio is 27 to 1 because we have no marketing. That’s going to decrease as we have marketing hires." (05:55, Brian)
• Actionable Benchmarks:
  • $10M+ in revenue
  • $5M+ in EBITDA
  • 80%+ revenue growth & retention
  • 30%+ EBITDA margin
  • LTV/CAC of 10:1 or higher
  • "Don’t even think about selling your company until you’re $10 million plus in revenue… Your LTV to CAC is over 10 to 1." (06:12, Brian)

Brian stresses these metrics aren't usually shown on a P&L—digging for them is crucial in due diligence.

3. Value Subtractors: Metrics That Decrease Value (06:44-09:50)

After value adders, Brian details the "value subtractors"—risk factors that make a business less attractive.

• Key Man Risk
  • "Can your business run without you? That's super important, but it doesn't matter until you're at $10 million plus. If you're sub $10 million, key man risk it away, it doesn't matter." (07:10, Brian)
• Key Client Risk
  • Over-reliance on a single client (e.g., one customer = 40-60% of revenue).
  • "We were just analyzing a company… they had 60% of their revenue from a handful of nonprofits. And we're like, dude, we're not doing this." (07:40, Brian)
  • Tip: Diversify your revenue base—balance of "sharks and minnows" (big clients & many small clients).
• Single Channel Risk: Relying heavily on one channel for revenue.
• Market Risk: Is your market shrinking or growing?
• Data Risk
  • "Do you have a good data room? Audited financials, trackable CRM? That's what they're looking for." (08:20, Brian)
  • Push vs. Pull data: Automated data (push) beats manual (pull).
  • "Third party verified, tracked, not on a Google spreadsheet. That's what we learned." (09:05, Brian)

Each risk typically is subtracted as a “point” from a possible valuation multiple.

• Illustrative Example:
  • Build up multipliers on value adders (e.g., +3 +2 +1 = 6x).
  • Subtract risks; Brian’s real-life example: "Action Academy, we came down to a 1x. We had a 6x, then a 5, so it came down to a 1x multiple. If I wanted to sell Action Academy today, we would sell for 1x net profit, which is terrible." (08:55, Brian)

4. Sales, Marketing, and Customer Success: Maximizing Value (09:50-13:00)

• Brian gives operational tips for founders and acquirers:
  • Focus on customer acquisition cost (CAC) reduction & lifetime value (LTV) increase.
  • Improve onboarding, set expectations, and ensure a smooth handoff from sales to client success.
    • "It’s increasing your onboarding process, setting proper expectations, having a personalized client success handshake… That is so important." (11:50, Brian)
• Time to Value (TTV)
  • Measure & minimize: "The number one metric that we track is how fast do we get you guys... to feeling like you got value on that investment as fast as humanly possible. Our goal is seven days." (12:10, Brian)
  • First 30 days are critical for new customer stickiness.
• Retention: Keep customers happy, gather testimonials, improve, and plan upsells for the future.

Notable Quotes & Memorable Moments

• On Why He Shares This Knowledge:
  "I spent thousands of dollars learning this from a seminar where I had people much richer than me teach me this stuff and now I teach it to you for free." (01:00, Brian)

• On the Reality of Risk:
  "We were just analyzing a company... 60% of their revenue was a handful of nonprofit organizations. And we're like, dude, we're not doing this." (07:40, Brian)

• On The Power of LTV:CAC:
  "This is the single most important business metric that they track... These are the only two sales and marketing efficiency metrics that you can track in your business and any business that you're looking to buy." (05:00, Brian)

• On Data Integrity:
  "Data risk is actually extremely important... You need to make sure every single bit of data is absolutely third party, verified, tracked, not on a Google spreadsheet. That's what we learned." (09:05, Brian)

• On The Importance of Onboarding:
  "Having a personalized client success handshake... is so important. These are things that we focus on 24/7 in the backend of Action Academy." (11:50, Brian)

Timestamps for Key Segments

| Segment | Timestamp | |--------------------------------------------------------|--------------| | Introduction & Purpose | 00:00–02:00 | | Business Valuation Basics: Revenue & EBITDA | 02:00–03:30 | | Value Adders & Multipliers | 03:30–06:44 | | Value Subtractors: Major Risks | 06:44–09:50 | | Operational Details: Sales, Marketing, & Customer Success | 09:50–13:00 |

Episode Takeaways

• For Buyers: Use this checklist to analyze business deals—look beyond surface-level financials to identify strengths, growth potential, and pitfalls.
• For Current Owners: Prioritize LTV/CAC, recurring revenue, high retention, strong margins, and diversified customer base to boost your company’s value.
• For Both: Data integrity and rapid value creation for customers are the building blocks of business success and marketability.

Recommended action: Take Brian’s eight-point framework and apply it to your deal pipeline or existing business—honestly assessing value adders and subtractors to know where you stand and how to level up before your next acquisition, sale, or scale-up.