Reasoning behind including revenue range in search criteria?

searcher profile

July 17, 2020

by a searcher from University of Southern California in Orange County, CA, USA

I'm interested to understand why revenue ranges are so often included in search criteria.

For example:
$###-###-#### million in Revenue
$2-10 million in EBITDA
Minimum 10% EBITDA margin

What does including the revenue range add to the screening effectiveness? To me it seems redundant, but perhaps I am missing something.

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commentor profile
Reply by a searcher
from The University of Texas at Austin in Fort Worth, TX, USA
Unless you're looking at businesses in some subset of the finance industry, it's quite possible you'll talk to sellers who have no idea what EBITDA means. I had multiple phone calls with owners of multi-million dollar businesses who were confused about the difference in terms like revenue, cashflow, profit, etc., much less EBITDA. In order to avoid appearing ignorant, they probably aren't going to ask you for clarification and will just assume they know what you're talking about, even if they don't. Looking back, we obviously had some false positives with people who thought they were big enough when in actuality they weren't. But it's hard to know how many false negatives there were that we missed out on.

Aim for simplicity in your messaging in outbound emails and on your public facing website/materials. You don't want people who would otherwise be good targets self-selecting out because they erroneously think they don't meet your criteria (it happens), so they just ignore your email. It's incumbent on you to communicate in way that is disarming, informative, and non-judgmental.
commentor profile
Reply by a searcher
from Georgetown University in Bettendorf, IA, USA
While it seems redundant I think it is more targeted towards the seller. If your primary search profile is going after potential owner sellers many of them simply don't think in the same way we do about earnings. Do you think most of them think in terms of EBITDA if they aren't already working with a broker? That metric (while I don't agree it's trash) isn't reality from an ownership perspective. Hey Mr. Seller, if you didn't write off all of the stuff your accountant lets you and ignore all of the taxes you pay and some other stuff, would you fit my criteria?

Some people I know avoid the EBITDA term entirely on their seller focused marketing materials and advertise a net income minimum. Don't need to adjust anything to read that line.
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