Did you know that most business owners think their business is worth more than it is? The reality is your business is only worth what someone will pay for it - not necessarily what you think they should pay.
If you are making decisions about business succession or transition based on guessing - you could be setting yourself up for disappointment.
In this week's video, I share two common reasons why owners overvalue their businesses, and an action step for you to take to eliminate the guesswork about your business's value.
You’ve poured a lot of blood, sweat and tears into building your business - let's make sure that when it's time to move on from your business, it really pays off for you!
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00:00
Hey everybody, Dan Holstein here helping your business take flight and this week I want to
challenge your thinking about what your business is and what it's worth is to you.
So stick around.
00:15
What do you think your business is worth? If you were to try to sell it today on the market as it is, warts and all, without changing anything what would it be worth?
Well, whatever number just popped into your head I'm going to suggest that your business is actually worth less than that in most cases.
And there's two main reasons for this.
00:30
The one is that you're too close to the business. Especially if you're a founder, you started it, you've poured money into it, you've probably gone without pay at times, you've worked many, many hours. You've worked overtime, evenings, weekends. You've missed out on family events. All the blood sweat and tears and sacrifice that has gone into building the business.
You have an intrinsic value in that, an emotional attachment to all that work you've put into it.
00:55
But the reality is a buyer doesn't care. They don't see all that. They're going to look at your
business as an investment as an asset, that's going to give them a return and they're going to have a really hard look at it. They're not going to be looking at through the rose coloured glasses that you're wearing when you're looking at your business.
01:08
So the second reason is, unless you've been relentlessly focused on building the value of the business, it's just not going to be there in the way that it could.
If you've been focusing more on revenue and profit and market share, in other words, scaling up the business. If your focus is going there to the ongoing nature of the business, as opposed to looking down the track to what the business is worth now and what it's going to be worth, you just wouldn't have taken the right actions to build the value in your business.
01:32
I'm going to be doing a 10 part series on key business value drivers that's going to be coming
up over the next few weeks. I encourage you to check it out and I really want you to start
thinking about your business as an asset and not just a cash flow machine. I want you to look at it as something that you own, that doesn't own you, something that you're going to be able to sell and have a wealth creation event one day.
01:51
So here's an optional action step for you.
I encourage you to get in touch with a Chartered Business Valuator, a CBV. This is a professional designation, and this person can help you determine what your business is worth.
They'll do an analysis and they'll say, "Hey, here's what your business is likely worth on the market today" and it's going to be pretty close to reality.
And they also be able to tell you what some of the things that are drawing that business valuation down and hint, hint, those are some of the things that I can help you with. I can help you improve that valuation.
So have yourself a great week, get in front of a CBV,find out what the reality is in terms of your business valuation so you know what to do to improve that valuation so your business is
going to be able to provide for you at some point in the future, in a wealth creation event.
02:30
Hey, if we're not already connected please connect with me on LinkedIn. Or if you're seeing
this on YouTube, hit subscribe and hit the notification bell, so you can get upcoming videos
and I look forward to hearing your comments about business valuation in the comments below. See you next time.