What’s My Business Worth?

Most small to medium-sized businesses are privately owned and operated by an entrepreneur who is busy keeping track of the day-to-day affairs of the business. Usually overworked, sometimes careless or lazy, such entrepreneurs rarely have a long-term plan for the future of their company. As a result, they may fail to recognize opportunities that are standing there right at their front door.

Often a slight shift in focus can produce a significant increase in the value of the company.

The following is an excerpt from Doug’s book “There’s Always a Way to Sell Your Business

Making It Worthwhile

A decade ago I gave a workshop in a small northeastern community. As a result, our firm was retained by a small business doing sales of approximately $1 million. They wanted an assessment of their company.

We did our Phase One Comprehensive Analysis, looking at the operating procedures within the business and at the people, too.

We reported to the owners, Joe and Sarah, that their business was worth $250,000.

Joe got pretty upset.

“Hey, you guys don’t know what you’re talking about. My business is worth at least a million.”

We walked Joe through five evaluation methods to show him why the business was not worth that much.

I looked Joe straight in the eye. “You would like $1 million for your company, right?” I asked him.

“Yes!”

“Then the first thing you need to do is get your lazy ass out of bed every morning and get to work before your employees do. No more of this arriving at nine-thirty or ten a.m.”

I definitely had Joe’s attention.

“Second, bring in a bag lunch and eat with your employees. No more two-hour lunches.”

Smoke was starting to come out of his ears.

“Third, you will be the last one to leave the business at the end of the day, after all your employees go home. And fourth, you will work diligently every day.”

“If you do that for a couple of years, this business will start to make real money. Your customers and employees will have more respect for your firm and the profit will be there to justify the value you are looking for. The sales will grow.”

Four years later one of my salesmen came to me and said, “Joe wants to know if you are still angry with him.”

“I never was angry with him. I just told it the way it was.”

I got Joe on the phone and after a few opening pleasantries, he said, “If I send you my statements for the last couple of years, would you take a quick look and see if perhaps we should be talking about selling?”

He did and we did.

The business sold about six months later for $980,000.

A business intermediary can look at a business and see opportunities the owner may not see. Doing some things a little differently may be all it takes to increase the value of the business. It may be changing the marketing strategy, investing differently in capital equipment, and/or expanding the territory. There are at least 14 Alternatives to Selling a Business.