Wouldn’t all business owners love for someone to show up to their door step and “write them a check” for their business? Of course we would. Still, over 95% of the business owners I’ve worked with do not have a realistic idea of what their business is worth or what the right exit strategy is for their personal future.
Again, it is understandable why they don’t know this as a private business owner. Why? “Exiting a business” is something they’ll likely only do once in their lifetime.
When I ask a typical private business owner what they think their business is worth, common mistakes include: trying to make a calculation based financial multiple-based comparison to a much larger, publicly traded company that sold in their industry; or, even something as simple as stating the number their accountant recorded for shareholder equity in their most recent quarterly reports. Yet, topics such as discounted cash flows and discount rates are foreign words to them. Again, it is understandable why they don’t know this as the owner of a private business does not need this view of their business for day-to-day operations nor for filing their tax returns.
Understanding these topics is something I refer to as being “Buyer Ready”. I’ve put together the following cool infographic to highlight how I begin to discuss the topic of being “Buyer Ready”. I’ll be diving into each section in more depth in future posts on this blog.
See a larger, more detailed version of the infographic on Page 2.
