In pure financial terms, a business’s sale value is the sum of its asset value and the value of the goodwill, or, perhaps more realistically, what someone is prepared to pay for it. This is a more complex area and will depend on financial performance, strategic value to the buyer and the availability of alternative options.
It’s value to the current owner is quite different, which is perhaps why so many business owners believe their business to be worth more than it is. After all, it delivers a very good standard of living and as they and their business partners are the only shareholders, it’s worth more to them than the accounts would suggest. Or, to put it another way, running a business and preparing accounts to maximise profits is very different to running a business and preparing accounts to (legally) mitigate and manage unnecessary tax liabilities.
There is, however, another element of business value many business owners over-look - and for good reason. It’s summed up by a great phrase from an ex-special forces associate of ours:
“When you’re stood on a mountain of value, it’s very easy to see everyone else’s value pile, but not so easy to see your own.”
How many business owners have you encountered that have been diverted from their core business, spent significant time, money and effort trying to develop new business ventures (which have ultimately failed) outside their own area of expertise or strength. All whilst their core business is far from “finished” or optimised? Perhaps you’ve even done this yourself? Starting something shiny, exciting and new is often more appealing and less complex than reviewing and picking apart what is already there and what you have worked with, or in, for years.
On many many occasions we’ve worked with companies that have strengths they don’t know they have, opportunities they can’t see and capabilities unique to them in their market place. In their pockets the owners have the potential seeds of new businesses, new markets and new growth that are left unplanted, un-nurtured and undeveloped because they haven’t realised they’re there.
Finding and developing these opportunities is one of our greatest strengths – it is, after all, much easier to see those mountains of value when you’re not stood on top of them and are looking for them. We have an objective experienced perspective gleaned from years of working with different businesses in a broad range of sectors.
For a no commitment, confidential chat about preparing yourself and your business for exit, please click here.