Gene Hackman said it best in the movie A Few Good Man “You can’t handle the truth” well for most business owners this is in fact true. Everyday I’m asked to give advice on how much a business is worth. And everyday I see relatively the same look on business owners faces when they find out.
When you’re a business owner and you’ve been working hard, bloody hard, for ten, fifteen or even twenty years and then decide its time to sell you would assume in all innocence that you business is worth a substantial amount. Unfortunately time doesn’t equal appreciation in the business world. Financial performance does. And it’s learning this at the late stages of deciding to sell that becomes all too much for many business owners.
So let’s break it down. You work 80 hours a week for twenty years in your business. You decide it’s time to retire so you call a few brokers. They come in all talking fast and flashy, take a look at your figures and deliver the news that you’re worthless or at least that’s the way it feels. You’re entitle to feel upset, you’ve just learned something pretty potent.
See most business owners never give any conscious thought to value or saleability until they actually want to sell but then it’s too late. Even if your advisor provides a list of recommended improvements to complete that will dramatically increase the value of your business over a two or three year period it’s all too late. You want to sell now, not in three years. So despite sounding like a good idea, the vast majority of business owners won’t commit to these improvements.
Learning the value of your business is not a surprise you want. Smart operators take a completely different approach. They reverse engineer their business so they can achieve a price they really want. Or in other words they decide what they want to get for the business in five years and find out what’s required to get this price.
Don’t leave it to the last minute, get advice now on a) what your business is worth and b) what you need to do to improve it. Taking these steps will ensure you’re not back into a corner in the last round.