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How to Realize the True Value of your Business

‘Begin with the end in mind’ is the title of a chapter in Stephen Covey’s book entitled ‘The 7 Habits of Highly Effective People’. As one of the ‘7 Habits’, it makes tremendous sense to know where you want to end up in your business before you begin.

One of the things that almost makes us just want to cry, is that virtually all small to medium sized business owners we meet have no defined exit strategy. They have some vague concept that they are – someday – going to sell their business for a lot of money. But in all honesty they don’t have a clue how. They don’t know how to position it. They don’t understand who’s going to buy it. They don’t really try to maximise it. They don’t set up or develop their business to run by itself. Most business owners we meet don’t understand that if there are 120,000 businesses for sale, only one in five will ever achieve anywhere near what the owner was hoping for that’s if it is sold at all as a ‘going’ concern’. Firstly, this is because it’s a very inefficient market, meaning that buyers and sellers can’t always find each other. But, secondly most business owners, when they are ready to sell, are ready to sell in a few months, there is no positioning of their assets for maximum sales appeal – no long term, fully worked-out exit strategy. And it’s a scary thing when most business owners think that they’re building wealth when really they’re not. This is nothing short of a tragedy, but it doesn’t have to be this way. There really is another path that you can follow.

Think about this – If we really can begin with the end in mind, then when we apply that to our businesses, it means that the business must have an end-point. An end-point where you can stand back and say, “Now it’s finally done.” At this point you can choose to keep it or you can choose to sell it. Let us plant this thought in your head to help you begin with the end in mind. Suppose we said that the purpose of creating your business was to sell it (whether you do or not). You’ll start to think in a totally different way and create different thought processes and pictures of what your business should really be like. When you sell your business, you’ll want to hand over your keys and walk away from a perfect money making machine worth many more times than when you started, and worth much more than its tangible asset value. And, to really optimise its value – significantly above the market price– your business must be able to successfully continue to profitably operate without you, and have a great range of tangible and intangible profit-generating assets! Here’s a little exercise – Write down what you would hope to get if you’re to sell your business today, and then stand back and critically look at your business as an outsider. Would you really pay that much for it, as it stands now? If not, jot down all the things you can think of that are wrong with it and what needs to be put right before you would buy it. And, please never forget – nearly all of the ‘real’ value of any business is in its customers/clients!

How to Realize the True Value of Your Business  
How to Realize the True Value of Your Business  

‘Begin with the end in mind’ is the title of a chapter in Stephen Covey’s book entitled ‘The 7 Habits of Highly Effective People’. As one of...