How to Find Out What Your Business is Really Worth – and What It Could Be Worth

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Have more control over your exit strategy.

Have more control over your exit strategy.

More than 70% of private business owners will exit their company in the next 15 years.

Those business owners are usually expecting big outcomes from the sale: they’re hoping to use that money to retire on, maintain their lifestyle as they turn their attention to other projects, or benefit a cause they think is worthy.

Most of those business owners need the net result of that sale to be as profitable as they possibly can.

Unfortunately, every other business owner is thinking the exact same thing. They’re pitching the same potential buyers. They’re using the same strategies and they’re selling in the same small pocket of time.

In short, there’s an oversupply of businesses for sale – and it can hurt your chances of getting your business’ full worth when you decide to sell.

The Biggest Pain Point

The vast majority of business owners expect to get far more from the sale of their business than they actually will. They wait to make their exit plan until they’re “ready” to leave the business, at which point they turn to advisors who offer utilitarian solutions like legal advice or insurance policies.

They think an exit strategy can be constructed in a short period of time. And while it is true that it is possible to create an exit strategy in very little time, it is difficult to create a profitable, successful one.

The misconception that you can shortcut your exit strategy has tricked many intelligent, successful business owners into thinking they have the matter of the sale well in hand, all the way up until they actually attempt to negotiate with a potential buyer.

When the seller expects to receive a far higher price for their business than a buyer is willing to grant, negotiations fall apart. The seller is offended and intends to look elsewhere, but he or she finds that this price really is what the market will bear.

The Final Consequence

When valuations are depressed, many business owners are forced to liquidate their companies to recoup some of the losses they’re facing – or be forced to accept a price less than expected. Liquidation is generally seen as a last resort, and it’s not in any successful business owner’s plans for their eventual exit strategy – but it often winds up being the most profitable way to leave.

The problem, of course, is that liquidation isn’t profitable. When you find yourself in a scenario where it is more profitable to liquidate than it is to sell, the gap between what you expected your business would sell for and its actual market price is very wide indeed.

We’re going to get into how to resolve this problem in subsequent posts, but first, let me ask you a simple question:

Is This The Legacy You Want?

You’ve worked hard to build a successful career, and its culmination was meant to be going out in a blaze of glory with the sale of this company. This company’s sale was meant to fuel your ambitions moving forward: your philanthropic efforts, your family’s hopes and dreams, your lifestyle as you move into retirement.

Are you willing to destroy your legacy out of sheer procrastination? Waiting to assess your business until you’re ready to leave will guarantee you an exit strategy that results in a fraction of the net profit you hoped for.

Many business owners are too proud to take a hard look at their company’s true value. They want to believe they have done everything right leading up to the sale. They don’t want to think there may be some critical points they’ve overlooked, and it’s not difficult to understand why: business owners who intend to sell as part of their exit strategies have generally had lucrative and successful careers thus far.

But, as the old adage says, pride comes before a fall.

By failing to make a full exit strategy that includes a proper assessment of your business’ value, you could be leaving millions on the table.

It’s time to set aside your pride and start looking seriously at how you can improve your business’ value right now – so that when it comes time to sell, you’re one of the few business owners in the glutted market who walks away triumphant.

 

About the Author

Mindy N. Jones CPA, CVA specializes in the complexities of successfully exiting a business. Through her unique method, she guides successful business owners to understand what their business is worth, how to grow value, how to limit taxes when they are ready to exit, thereby creating a legacy of their choosing. Mindy’s a CPA and a business valuation expert (CVA). She holds both an MBA and a Masters in Taxation, and is the author of the Small Business Crusader blog. Contact Mindy via her website at Small Business Crusader

Mindy N. Jones – who has written posts on Market Leadership Journal.


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