No Matter What Someone Has Told You In The Past About What Your Business Is Worth, They Were Probably WRONG!
There are literally dozens of reasons to want to know what your business is worth. You may need to know the precise valuation of your company so you can accurately undergo a partnership buyout. You may need an exact down-to-the-penny figure to enable you to do a gift tax calculation for an estate plan. You may need to find out the value of your company for a marital dissolution or for some type of bank financing or succession planning or possibly for an employee stock incentive program. These are all completely valid and common reasons to want to know what your business is worth. But, if you want to know what your business is worth so you can sell it, then there is only one correct answer. Your business is worth what someone is willing to pay you for it.
A strategic buyer is going to be another company that wants to use your business to expand their business by solving one of their big problems. They want to be able to use the acquisition of your company to exponentially grow their business by instantly solving one of their problems. The problem may be that they need a larger client base, they may need another location to handle more production, they may need already trained and experienced personnel, but whatever the reason, they are willing to buy your business to solve their problem and grow strategically versus organically.
The problem is that if you ever intend to be able to sell your business to a strategic buyer, you have to position your business to be the solution to one of their big problems, but right now your business has been built to solve your problems…not theirs. This means that you are currently building your business to provide you with a comfortable income, vacation, security, prominent position in your community or any number of valid personal reasons. But none of these reasons are real solutions that a strategic buyer needs or more importantly would be willing to pay you top dollar for.
There is another way!
You have to stop what you are doing now and begin to build your business for a strategic buyer. You need to turn your business into a big solution in order to earn that big check! The good news is that growing your business for a strategic buyer and building the business to suit your personal needs do not have to be mutually exclusive. You can do both at the same time if you do it correctly and if you take action on it now.
Here is a 3 step “quick start” process for you to get started:
Step 1 - List your top 10 potential buyers. You select your buyer, the buyer does not select you. This may sound very counterintuitive, it probably sounds backwards. You have always heard that you put your business up for sale and wait for buyers to make you offers. Well, this is the way to sell your business for pennies on the dollar, if you want to get top dollar then you will proactively seek buyers that meet your buying criteria. Meaning that they have money to pay you cash and that they have a big problem that your business solves.
Step 2 – List the top 3 solutions that your business provides. If you have a healthy and responsive list of clients, then list this as one of your solutions. If you have well documented and proven operating systems, then list this as a solution. Go through the details of your business and figure out what makes your business stand out from other businesses like yours, put yourself in a market of one and think like a buyer. Imagine selling your business to a guy like Gerald and being able to tell Gerald that you have the strategic solution to his problems.
Step 3 – Begin the work now. You do not want to wait until it is time for you to sell your business to start looking for buyers. You can actually start to look right now. Begin by researching your potential buyer to determine if they have ever done an acquisition before. Then research if there are any weak spots in your buyers business and begin to find a great fit between any problems your buyer has and the solutions that your business solves.
By taking these 3 steps you will be lightyears ahead of all other businesses on the market right now. The time and effort you put into the preparation will pay off with a much higher value for your business and many more zeros on the check you get when you sell your business.