Transferabilty lends to sellability. Of course, no one is going to want to buy your business if it isn’t making money. We all get that. But for many of you, the problem isn’t making money. You are successful. You know how to run your business, and you know how to make money.
But I can help you improve owner’s income by addressing some opportunities while simultaneously defending your value – some of these things you already know, but you may not be sure how to start. Or maybe you don’t know how to find the time to start.
But it’s important that you do start, because the valuation of your company isn’t just about free cash flow, or EBITDA (which is short for Earnings Before Interest, Taxes, Depreciation, andAamortization – which is the closest accounting approximation to free cash flow). It’s largely about the multiple of EBITDA your company will sell for.
The simplest understanding of this is what we all know – the stock market. Think of the price-to-earnings, or P/E ratio. A company is selling at a high multiple of price-to-earnings because it’s a good company, or it’s selling at a low multiple of price-to-earnings because it’s a bad company. We all get that concept. But business owners almost never seem to apply that concept to themselves. Which is unfortunate, because if you’re like most other business owners, about 80% of your net worth is tied up in your business.
There are levers that affect that multiple, which can make your company more valuable –which defines if your company is good or bad. If you’ve read my book, “Build It, Sell It, Profit”, you know that I address those. You also know that I am a huge fan of documented and automated workflows. They make your business more scalable, more profitable, and more transferable.