Picture this: You’re sitting in a large corner office, sunshine streaming through the windows.
You anxiously sip your glass of water as your potential buyer prepares to present their offer.
You’ve waited weeks, months, years. Today is the day you find out just what your company is worth… and you’re on tenterhooks.
Slowly, you scan the page before you, focusing in on the number that represents the full, objective value of your business.
All you can manage in response is a mumbled, “wow.”
This is more money than you ever imagined receiving for your business! You pinch yourself to make sure you’re not dreaming and scramble for a pen.
In my last article, I explained how creating a valuable business has little to do with profits or passion.
You can have both… But unless someone else is willing to pay good money for your business, it is not inherently, objectively valuable.
Now, I imagine you’re wondering, “How to create more of that inherent value, for which someone else would pay big money?”
The answer is simple: Your business needs to deliver consistently… without you being there to run it.
You do this by establishing the systems and processes necessary for your business to run efficiently, whether or not you are in the picture.
A good (and classic) example? McDonald’s.
Its annual employee turnover is reportedly nearly 44%.[1]
Yet, even with such high turnover, nearly every single franchise runs like clockwork.
This is because the value isn’t tied up in any individual employee.
It is in the finely tuned systems they use, to make and sell their product.
Everything is standardised:
The size of their burgers. The order in which their burgers are assembled.
What they charge.
Their supply chain.
Their sales systems.
The way they train their staff.
Customer experience.
It doesn’t matter who is manning the tills or flipping the burgers. The quality will be consistent, every time.
You see, when you buy a McDonald’s franchise, you are not paying for the profits or name.
You’re buying the system…
…One that is clearly laid out, proven and effective – so you know your new business will succeed, even if McDonald’s CEO never sets foot in your restaurant.
Every business can do this – because it has nothing to do with McDonald’s product, or what they do….
….It’s all about how they do it.
If you want others to perceive value in your business, too, and be willing to pay money for it one day, you also have to create a business that will work without you.
Don’t get me wrong: Your business can still work for you, for as long as you own it.
You should still enjoy running it, it should still support the lifestyle you want, it should still conform to your vision.
There is nothing wrong with loving what you do! In fact, you should.
But, as you expand your empire, you need to make sure that it will be just as valuable to the next owner, as well.
Remember: Great systems lead to high value.
Notice I didn’t say, “Great profit leads to high value.” (A common mistake.)
Uber is worth $82 billion, but it is still not profitable.
Yet shareholders are willing to pay because they perceive that its infrastructure, technology and operating structure have inherent value, no matter who is steering the ship.
On the other hand, there are plenty of highly profitable companies which are not really worth very much.
Remember Martin, who I told you about last week? He dominated the market for online training in a particular sector, making a lot of money.
But since the business was highly dependent on him, and there was nothing about his technology which others could not copy, his business was simply not worth as much to others as it was to him.
So how do you get started?
When you are in the trenches, building your business day-in, day-out, it can be difficult to implement the essential systems that lead to high value.
You are used to being an integral part of everyday operations. Extricating yourself seems impossible. It isn’t, though.
My next email will focus on the three-step process you need to establish your own valuable systems and processes.
Stay tuned!
