More results...
We all believe that in some way our qualities are above average. Of course, statistically, this is impossible.
If I were to ask you what your business was worth, odds are you would tell me an above-market price. However, if I asked your key managers, I probably would get a much different number. After all, if it comes to your attention that your most trusted managers have reservations, most certainly a potential buyer would get spooked.
Now imagine if someone you trusted asked your business relationships the following questions which could be answered in the pre-COVID timeframe:
Whether you are decades away from selling your business or you just turned your lights on, preparing a business as though it will be sold today is the most valuable “best practice” management advice anyone can give you. The key to “best practices” is a way of understanding and fine-tuning the business.
The key value drivers of any business are the four intangibles:
Intangibles are challenging to grow because as a non-financial asset, they are hidden from view. A valuable tool that is available on my website bhwealth.com/succession-planning offers a questionnaire that provides you an Attractiveness Index Score and Report.
Created by MAUS Business Systems, the questionnaire is designed to help business owners score key areas of their organization: business factors, forecast factors, market factors, and investor considerations.
Here are some of the questions you’ll be asked to score on a scale of 1-6:
The higher you score in this questionnaire, the higher the likely value of your business is. The report should also be seen as a checklist of areas to improve upon before you try and sell your business. Ideally, many years before you decide to sell. The relative attractiveness of your business to a potential purchaser will impact your overall valuation. Once completed, I’ll forward you a report.
Of all four, you’ll find the investor considerations are the most compelling. At the end of the day, it doesn’t matter how valuable you believe your business is. The only truth is the amount of risk a potential buyer perceives your business to have. The more risk, the lower the value. The less risk, the higher the value. This applies to a strategic buyer, a third-party buyer, a family member, an employee, an investor, or another. In terms of business value, the metrics are the same.
“Best practices” using the filter of succession planning can be developed from a reverse due diligence process, which is designed from the buyer’s perspective. The thinking is what would a buyer look for which would maximize the value of my business. This way, a best practice approach is not theoretical. The goal is to always about the perceived value from your stakeholders.
Business owners that go through an exit & succession planning process are more likely to:
Mirror, mirror on the wall – will I be able to exit my business successfully? Who knows, but you can take steps to orchestrate sound financial decisions on your way to the finale.
Jaimie Blackman — a former music educator and retailer— is co-founder of BH Wealth Management. The organization offers 401(k), insurance, and succession planning services. Download your complimentary copy of End Your War With Money at bhwealth.com/moneycapsules. Registered Representative, First Allied Securities, Inc. Member FINRA/SIPC
Join the Conversation!
Leave a comment below. Remember to keep it positive!