Joe Knight is a Harvard business best-selling Author and Founder of Setpoint Systems and the Business Literacy Institute. He provides venture capital seed money and enjoys mentoring startups.
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Financial Intelligence– Joe’s book
Business-Literacy – Joe’s website
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3 Value Bombs
1) The reason every person starts a business is for the money.
2) Your dreams will never be realized if your business is not profitable.
3) Always look at your cash flow to evaluate how well you’re doing.
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(click the time stamp to jump directly to that point in the episode.)
[00:50] – Everything that’s happened in Joe’s career started with SetPoint
[01:03] – His goal was to make SetPoint an open financial company
[02:42] – His area of expertise is in understanding how to make money in a business
[03:38] – Share something we don’t know about your area of expertise that as Entrepreneurs, we probably should: Unlike what management believes, many executives don’t understand finance on a basic level, so Joe and his team developed a questionnaire to help them
[05:38] – Joe is involved in several businesses, including a small medical group that is trying to build a cash-only doctors’ medical network
[06:52] – The only reason you start a business is to make money
[07:38] – “If you can’t make money, your dream will never be realized”
[08:13] – Founders need to understand that they need someone on their team to help them grow a profit
[09:30] – Two engineers came to Joe to build a partnership with him because they needed a transparent financial system in place—this is what led Joe to start teaching finance
[13:53] – Private equity group project
[14:31] – Angel investors project
[15:00] – Between the two, there are different points in the deal
[15:36] – When making a deal, make sure you work with someone who knows your industry
[16:09] – Any business owner SHOULD focus on EBITDA (earnings before interest, taxes, depreciation and amortization)
[16:55] – “If your business is $1M EBITDA and your multiple in your industry is about 5, chances are groups will offer you $5M or 5 times your EBITDA, subject to an audit called due diligence”
[17:14] – The second method is discounted cashflow – the EBITDA forecast for future cashflows will be discounted through NPV (net present value)
[19:10] – What is the one thing you are most FIRED up about today? “I’m most fired up about all the business opportunities out there”
[19:43] – “Profit is NOT cash”
[20:54] – Everybody focuses on profit and EBITDA but really, the focus should be on one’s cash flow
[21:20] – Cash flow shows on the balance sheet and cannot be cheated
[22:54] – “If you’re profitable, your idea will live”
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