#430: Cash vs. Valuation: Why Entrepreneurs Get Trapped in the Wrong Financial Metrics with Patrick Donohue

I’ve spent the last handful of episodes diving deep into business valuations, M&A jargon, and how buyers think about value. But here’s the thing—most of it doesn’t matter unless you actually have cash left over at the end of the day. 

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That’s why I brought Patrick Donohue back on the show. He and I have been in the trenches, working with owner-operators who are juggling cash flow, making sense of the noise, and trying to figure out how to actually use their business to create wealth. 

In this episode, we strip away the BS and focus on the fundamentals—how to manage and maximize free cash flow so you have real options as an owner. Patrick and I talk about why EBITDA is misleading, how financial jargon is designed to confuse business owners, and how to structure your company’s financials to serve your ownership goals. 

If you want to ensure you’re making financial decisions that actually increase your freedom—not just grow revenue for the sake of it—this episode is a must-listen.

Patrick Donohue is an investor, entrepreneur, and author of Breakout Valuation. As the founder of Hill Capital Corporation, he helps privately held business owners access the capital they need to grow without giving up control. His mission is to simplify financial decision-making so that entrepreneurs can focus on what really matters—building a profitable, cash-flowing business that serves their long-term ownership goals.

Chapters:  

• (00:00) Discussion of independence, value creation and free cash flow fundamentals 

• (06:53) The problem with Wall Street complexity and financial terminology 

• (08:44) Examining the role of valuation businesses and industry complexity 

• (13:05) Hill Capital's approach to business investment and returns, dangers of predatory fintech and merchant cash advances 

• (19:01) Real-world example of factoring costs and cash flow struggles 

• (24:40)  Breaking down merchant funding attributes and warning signs 

• (30:16) Understanding capital matching and funding incentives 

• (42:49) Discussion of business forecasting and economic engine optimization 

• (52:26) Analysis of capital matching and funding options for growth, demographic changes on business cash flow 

• (01:05:49) Dell Computer example and cash conversion optimization 

• (01:15:47) Exploring business exit options and maintaining company culture 

• (01:20:04) Closing thoughts on entrepreneur options, decision-making, and peer connections 

• Rate, comment and share with the owner/operators you know! 

Ryan Tansom is a seasoned entrepreneur, speaker, and the founder of Independence by Design™, a transformative ownership framework for growth-oriented business owners. After turning around and selling his family business in an eight-figure exit, Ryan spent over a decade dissecting the lessons learned from his journey. His mission is to help other business owners avoid the pitfalls he encountered by providing them with the tools and knowledge to align their business opera