The One Number Owners Need to Stop Focusing On

July 2, 2019 - jdrgroup

 

 

The value of your business comes down to a single equation: what multiple of your profit is an acquirer willing to pay for your company?

Profit × Multiple = Value

Most owners believe the best way to improve the value of their company is to make more profit – so, they find ways to sell more and more. As experts in their industry, it’s natural that customers want to personally engage with them, which means spending more time on the phones, on the road and face-to-face to increase sales.

With this model, a company can slightly grow, but the owner’s life becomes much more difficult: customers demand more time and service, employees begin to burn out, and soon it feels like there are not enough hours in the day. Revenue flat lines, health can suffer and relationships get strained – all from working too much. Does this feel familiar?

If you’re spending too much time and effort on increasing your profit, you could find yourself diminishing the overall value of your business. The solution? Focus on driving your multiple (the other number in the equation above). Driving your multiple will ultimately help you grow your company value, improve your profit and redeem your freedom.

What Drives Your Multiple

Differentiated Market Position

Acquirers only buy what they could not easily create, so expect to be paid more if you have close to a monopoly on what you sell and/or are one of the few companies who have been licensed to provide the specific product or service in your market.

Lots of Runway

Most founders think market share is something to strive for, but in the eyes of an acquirer, it can decrease the value of your business because you’ve already sopped up most of the opportunity.

Recurring Revenue

An acquirer is going to want to know how your business will do once you leave – recurring revenue assures them that there will still be a business once the founder hits eject.

Financials

The size and profitability of your company will matter to investors. So will the quality of your bookkeeping.

The You Factor

The most valuable businesses can thrive without their owners. The inverse is also true because the most valuable businesses are masters of independence.

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VALUE YOUR BUSINESS

INCREASE THE VALUE OF YOUR BUSINESS BY UP TO 71%

Your company is probably your largest asset.

It’s likely worth more than your house or your investment portfolio. But unlocking the value in your business can be tricky. For you to cash out, someone has to want to buy the company you’ve created.

That’s where The Value Builder Score comes in. The Value Builder Score is an assessment tool that allows you to see your company as a buyer would see it. Complete The Value Builder Score questionnaire and you will receive your overall score along with your performance on the eight key drivers of Value – each one of which is statistically proven to be important to buyers.

You can instantly get your score here. If you then decide to come to the workshop, we will present you with a full a detailed report which covers your score in each area of the 8 drivers in much more detail.

Book onto the workshop today and get your free valuation!

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What Your business is Worth

If you’re like a lot of entrepreneurs, you assume the value of your company will be determined by your industry and its size. While size matters, there are actually seven other factors that impact the value of your company more than your industry. In fact, after analysing more than 30,000 businesses, The Value Builder System™ has discovered getting these seven factors right can lead to acquisition offers that are more than twice the industry average. Likewise, we have seen examples of companies getting less than half the industry average multiple because of a weakness in one or more of these seven areas. To see how your company scores, you can complete the Value Builder questionnaire and get a report on how you’re doing in each area.

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