Around the Web: A Week in Summary
A recent article from Wilmington Biz entitled “Is Your Business Worth as Much as You Think?” explains the reasons why it is important to know how much your business is worth at all times.
As a proud, successful business owner, it is very easy to incorrectly estimate the value of your business. For instance, the recent sale price of a similar business, the value of your current assets and revenues, or even just a gut feeling based on your belief in the business and its potential may provide what seems like sensible values to many owners. Unfortunately all of these are also very misleading. Many factors go into the amount of money a business would be worth on the market, and the majority of them are based on how a potential buyer would see the business. As the current owner, even if you’re not looking to sell, having a clear idea of what this value is and why gives you a solid place to plan ahead for your business and its next steps.
Knowing the value of your business in the present gives you the ability to make adjustments that will benefit the future of the business, your employees and yourself with plenty of time to make the necessary adjustments. Too often business owners wait to value their businesses until they’re looking to sell and they deprive themselves of the valuable time it can take to make changes that will better their chances of selling for a price they find desirable.
A recent article from MiBiz entitled “Smart Approaches for Selling a Business” explains the importance of working with a qualified team when selling your business.
The sale of your business is indeed a financial transaction, however it is a financial transaction with collateral consequences. When a business is sold, common things to consider are your goals post-sale, the wellbeing of your employees, family and clients. Whatever your bottom line is, make sure to pinpoint your goals for the sale before determining how you will proceed.
Equally as important as being organized and intentional with the sale of your business, is working with professionals who can guide you through the process. A financial advisor, attorney, business broker and investment banker can all work alongside you during certain steps of the process to ensure that both your personal best interests are being met as well as the business’s. Without them, money could be left on the table and missteps can occur that have unforeseen costs later down the road.
During the sales process, lining up all of the pieces to this intricate puzzle is critical. The most important piece, an often most overlooked one, is patience. There are a lot of details that go into selling a company, and taking your time through each step and waiting out the right buyer can pay off big time in the long run.
A recent article from The Business Journals entitled “Are You Living for Today as a Business Owner or Building Value?” discusses the difference between a lifestyle business and a business that is a saleable asset.
It is important to be able to distinguish between these two, so that you are able to determine what your exit strategy will be. Many business owners assume that if their business is making a profit, that their business is valuable and sellable. This isn’t the case. If an owner cannot walk away from the business and it will still generate revenue, then it does not have a saleable value. When this is the case, the owner should be taking alternative steps to generate asset value such as investments outside of their business.
Often, a business owner who is running a lifestyle business makes the mistake of solely depending on the income that their business provides for them until it is too late. Having a plan in place to either make your company self-sufficient without your role in the company, or to build investments that you can rely on after you leave the business is imperative.