Frequently when I start working with business owners they want to know how much their business is worth.
Many owners have dreams of retiring and selling their business for a million dollars or another magical number they believe it is worth. Yet in many cases these same business owners have not taken the time to create value in their business so that it is saleable.
Often after we talk about it for a few minutes they understand that they are just selling a job or, worse yet, just the inventory. Who really wants to buy a business where everything is dependent on the current owner or a business that is barely paying the owner's wages? These are exactly the same reasons the current owner is asking me what it is worth and thinking of getting out.
In order to create a business that has value, business owners need to think strategically. Whether you want to sell your business tomorrow or in five years time, there are certain things that buyers are looking for.
These include:
Profits - buyers and owners need profits. If you have a business and are making only marginal profits you need to look at a variety of strategies that work to increase profitability. A business without profits has no or little value.
A company that runs itself - a business where the owner doesn't have to be there and a team can run the company gives the buyer two options. They can either run the company themselves and eliminate the manager in order to make more money or run the company with the team and get a return on their investment for little or no work.
Systems - even if you don't want to sell your business, you should look at reducing your workload to enable you to work on your business and not in the daily grind. This requires systems that work to allow your employees to know exactly what to do and when to do it. Without this, your business lacks value.
Businesses can be a valuable asset for owners, however in order to create value business owners lneed to think like a buyer and build their business so that they can sell it when they need to.
Dave Fuller, MBA, is a Certified Professional Business Coach in Prince George with over 30 years of business experience. He can be reached at [email protected].
