Some typical questions you may be asked:
- How much are you considering selling your business for?
- How much is your company valued at?
- What is the value of your company?
- How much money would you sell your business for?
Those most common answer: $1,000,000! The real value? Maybe $40,000.
So what happens here?
Years of blood, sweat and tears, your business is your baby and one of the most valuable things in the world – to you. You probably don’t really want to sell it. That’s your perspective. Value is determined by the market, that is, what other people are willing and able to pay for it. If no one will buy it, there is no value.
The quickest way to make investors smile, or to get them offside, is to emotively respond with a valuation plucked out of thin air. Valuations come from value. What we hold of dear value, may not contain the same value to someone else, or if we are out of the picture and no longer associated with the asset.
Looking at a business from the perspective of an asset is a horrifying thought to some people. It is a crucial perspective to first acknowledge, and then understand relative to you and your business.
Regardless of whether you have a desire to sell your business or not, the position of being able to sell it holds extraordinary, sometimes necessary value.
- Consider what happens if:
- The market crashes
- A family member becomes sick
- You need to relocate
- A major customer becomes insolvent and cannot pay their accounts
- You are sued
- You are hit by a bus
- You need to buy new equipment
- You want a new major contract
- Your employees resign
- A deal falls over
- You are pregnant
- Your car is written off
- There’s storm damage
- You win a major new contract
- The media gets hold of a photo they should not have…
Employees need to know the company they are working for will be around and will be able to pay them. Banks need to know your business will be around and you can repay them.
Investors need to know they can leverage the assets and get a return on their investment.
Insurance companies need evidence on what they are insuring you for.
Government grants need to know your company is sustainable and poised for growth.
Major clients need to know the company can continue to service them the life of the contract.
Suppliers need to know the company can pay their accounts to approve credit.
The list goes on…
Being exit-ready is not about you! It’s about everyone else around you.