Potential acquirers use 10,001 Hours to perform valuations of their targets. More often than you might expect, the sellers are not always that sophisticated – many sellers technically own the business, but it’s really not much more than a glorified job. And their pitch is “growth potential”, that there are many opportunities to pursue but they, the current owner, just didn’t have the time to do so. But YOU can. At best, their best sales pitch is that they’ve been lazy. At worst, there is really no growth opportunity because, if there was, there would have been an economically feasible to find a way to exploit it. When they see our professional valuation, relative to the grand, high price they had in their mind, they are incredulous. They cannot accept that their business, their beautiful baby, isn’t worth as much as they thought.
But you won’t be an unsophisticated seller. My book, “Build It, Sell It, Profit” walks you through how to approach a transition. Still, I like to share the horror stories because it helps get my point across. Even at your advanced level, you and a buyer have two different frames of mind. It’s your ending point and their starting point.
Growth potential isn’t about what hasn’t been done yet, but rather demonstrating what the business has done and providing the plan required to go further. Growth potential is not about how well known you are in the community, or that you won some industry award.
Growth potential is about pipeline, scalability, introducing and cross-selling new products to existing customers, entering a new geography or demographic. It’s never about how long you’ve been in business.