But how much is it worth? Do you know? Is the value increasing year after year?
The last question matters the most. You can make assumptions about valuation and growth, but assumptions will only get you so far.
As the owner, you’ve put in a lot of effort to create and expand your company – years of blood, sweat, and tears. Knowing the actual worth of your company matters a ton for both sound business strategy and personal goals & legacy.
We’ll go into why and how you should determine your business’s value.
Always Know Your Value
You should know the value of your business just like you should know the value of your time and your products. The business is probably your biggest asset – know its worth at all times!
Owners falsely assume that they should only seek a business appraisal if they plan to sell the business. Really, you should create or purchase an general assessment of your company’s worth annually. Why?
- To move towards the end goal more quickly – Sell, pass on, liquidate?
- To be able to sell if needed – what if you experience a major life change or find a new opportunity?
- To plan for your retirement
- To have leverage when negotiating with partners
- To protect your family
- To access funding if needed
And this only scratches the surface. Remember – life can change fast. The value and health of your business greatly affects how easily you can jump on new opportunities life will throw at you. Valuations typically cost between $3,000 and $40,000 depending on size and complexity. You may want to consider it.
Consistently Add Value
Approximately 30 to 40% of businesses listed for sale actually ever sell. And the ones that do sell don’t get a great return. This happens because the owner either fails to properly prepare for the sale OR they had unrealistic expectations – A.K.A. their business was worth a lot less than they thought.
Whether you want to sell soon or way down the line, consistent growth in all aspects of your business should be a priority. Let’s break down the top 5 ways to consistently add this growth and value to the business.
1. Improve your cash flow – Buyers want to see customers, revenue and profit. You can’t wave a magic wand and increase these numbers. Or can you? Start by increasing your Five Ways numbers (leads, conversions, number of transactions, average dollar sale, and margins). A 10% increase in all of these areas will have a huge impact on your bottom line.
2. Build great systems – Buyers need assurance that they won’t inherit a dumpster fire. Systems allow for the old and new owner to spend as little time as possible handling the day-to-day in the business. And we all know that that has a huge dollar value.
3. Create a rockstar team – Your people are your greatest asset. They take care of the customers who take care of you and your business. This “intangible” makes your business look way more enticing to the market. Don’t rely on one general manager – have several rockstar employees who can drive the ship when you sell.
4. Have great relationships – Believe it or not, your rolodex adds tons of value to the business as well. Which strategic partners advocate for your brand? What do customers say online? Treat great relationships like assets.
As a business owners, you should not do “busy work” or put out fires. You need to consistently focus on these key areas to building intrinsic value.
I’ve tried to make these concepts as simple as possible. But preparing your business for a sale will require way more considerations. Who? How? When? How much? Our coaches use tested and proven systems to increase the asset value of your business and prepare you for a sale. An ActionCOACH in our 1000+ coach network has likely coached or even helped sold a business similar to yours.
More importantly, a coach will get you committed and excited to make the sale and chase the next dream.