Is your business valuable05th June 2019
Today, I’d like to discuss a key concept you must consider as you grow your business: How to create real, lasting value.
If you dream of establishing a legacy - building an organisation that can survive without you and that you could one day sell for enormous profit - you MUST create value.
And your business only has value if someone else is willing to pay for it.
Consider these two entrepreneurs.
Beth owned a company that built radar reflection technology. Her product was used on life rafts so people could be detected at sea.
Martin owned a company that created online training modules for employees of tech companies.
Both owners loved running their businesses, dedicating hours and years of their lives to nurture them from start-up to maturity.
And both businesses were immensely profitable.
But when it came to their business-building approach, the two owners couldn’t be more different.
Martin started his day at 5am. Sipping his first cup of coffee, he would respond to emails and voicemails from customers, vendors, and employees.
He arrived at the office before anyone else and was always the last to leave.
And annual leave? Forget about it.
Even though his company was several years old and well-established, he was still an integral part of its day-to-day operations, signing off on every major project.
Beth, on the other hand, had put in the hard work to build her company from the ground-up, and now her priority was making time for life - friends, travel, new ventures.
While she still served in a supervisory role, the company functioned well without her.
One year, she spent three months in Bali.
Both Martin and Beth earned a sizeable income creating a product that helped people.
In many ways, their businesses followed similar paths.
But when it came time to sell their companies, which do you think was deemed more valuable?
Martin was shocked to discover that buyers were not willing to pay anything near what he believed his business was worth.
They knew that they would find it hard to run the company without him. The company’s value was tied up with Martin.
Beth’s company, on the other hand, operated completely independent of her.
Her vision and guidance was important, but if she went, the company would still function well.
There was another crucial difference, too.
There was nothing truly unique about the product Martin’s company had developed. The training modules were excellent, but there was nothing to stop others copying the idea.
Beth’s radar technology, on the other hand, was patented, and had several other applications which could be big money-makers.
It was valuable in and of itself.
You won’t be surprised to hear that Beth’s buyers were willing to pay a lot more money for her company.
The moral of this story?
In my last few articles, I’ve been talking about the need to build a business that works for you, the owner, giving your life meaning and allowing you to enjoy a lifestyle you love.
But it is not enough to build a business that is valuable for you, and you alone.
It has to be objectively valuable, too.
And the only way to measure that is to ask yourself whether others would be willing to buy your company.
Too many business owners believe they are accomplishing this….
… until they find themselves sitting face-to-face with a potential buyer who says otherwise.
So how do you avoid that scenario?
Look for my next article, where I’ll share exactly how to create a business with inherent value, and how you can start building your lasting legacy right now.