No matter what, no matter when…its always the same question and justifiably so. How much is my business worth. Invariably ever business owner goes to the market place and looks at what things are LISTED for and assumes that they are going to get that number. Its like believing the deal that goes down on Shark Tank is actually the deal that gets signed on paper. It’s naive and silly and largely based on wishful thinking born of hope…hope grounded in Rainbows and Unicorns.
I have never been one to be accused of sugar coating things so lets get after real facts. Facts that will improve your business. There are two critical factors that have an overriding impact on your business sale:
- The quality of your books and records…deal after deal dies due to bad book-keeping, poor records, and short term tax strategy vs long term planning.
- Unrealistic Pricing coupled with the inability to finance the deal. The ability of a deal to get financed is a limiting factor…if a buyer cant get capital because you did something silly related to bullet #1 then # 2 will hit you just like a pile of #2 (get the reference)?
Now assuming you address #1 and #2 you will largely be on your way because you will be a scare commodity. A business with provable books and access to buyer capital. Next you need to address the things that drive best in class behavior.
These are the Four Intangible Capital Items:
The Four Intangible Capitals are the Qualitative things that drive overall value. Many years ago I sat in a sales meeting and an Old Broker (most are) sat in the back and kept holding up two fingers every time we looked at a deal. I asked him why…he basically said that at main street deals sell for 2 x…in retrospect he is right because business owners do not address the 4 Capitals.
Building a Brand, Insuring you have Infrastructure and Management apart from yourself, Sticky Revenue with Customers in either contracts or by becoming critical to their internal processes, and Management with the capacity to scale up …these are examples of intangible non balance sheet value drivers business owners need to focus on as much as the financial.
For more on buying and selling a business in Tampa contact Michael Shea at mike@tworld.com or call 321-287-0349.