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How do you value your business as a business owner?
There is multiple ways to do it and there’s more than one group that’s interested in this. So, for example, say that you want to value your business for a purely financial buyer. That buyer is going to pay some amount for the amount of cash flow that you generate off your business. So what does that mean to you as an owner? Well think about a business where you as the owner are responsible for 100% of sales.
So. since you’re going to be selling your cash flow to another buyer, that cash flow has to be consistent and has to be repetitive. If you’re the only person doing the sales what do you think’s going to happen to the cash flow of your business when you’re not in it any more? Right now it’s likely to go to zero or the new buyer has to take over all of the sales responsibilities. If the buyer has to do that much work it’s going to decrease the amount of money they’re willing to pay you for your business.
The upside — creating a great business and particularly a business that’s professional, growing and separates you from having to be in the day-to-day. Both makes your business more valuable because there’s not a risk of lost cash flow when the owner leaves and it give you the ability to kind of work on your own time, on your own schedule and not have to spend 80 hours a week in your business making sure that every last detail is tied down. So, let’s grow a great business.
Let’s build it on a strong foundation. Let’s put you in a position as the owner that the cash flow is completely dependent on you. That makes your business more valuable. And, by the way, it creates more profit for you along the way.
We’ve built a free business health check. It’ a diagnostic tool that through multiple choice questions helps you identify the strengths and weaknesses in your business. To get your free report instantly and personalized for your business, go to http://wisconsinBusinessCoaching.com.
Check out this video http://youtu.be/C0xAKvLnsi8