by Dr Greg Chapman
A buyer will be brutally objective in looking at your assets. How do you think they will value your equipment which is starting to show the signs of wear, and certainly is not the latest model? How will they value your great location with a lease expiry in 2 years, and a potential big rent rise for a new lease? Will they value your staff who may leave when you do?
Often what a buyer pays for is your client list, but that is only the value of your existing clients who may also leave when you do.
While all these assets are valuable to you, a buyer will discount them heavily, which is why so many retiring business owners are very disappointed on the price they get when they sell their business.
What a business buyer really values is a marketing system that turns your business into a Profit Machine. That is you have a way of predictably generating enquiries that turn into new, profitable business. A system that does not rely on you.
Don't try and copy the guy down the road, pick up your marketing ideas from the best in the business. While there are many things you can't afford to do that they do, there are probably plenty of things you can do and they don't require a massive marketing budget. Things your customers will notice.
Typical business valuations are often around 2 times net profit (after the owners wages). That is what people pay for a client list. Franchises , which do have marketing systems in place will attract 4 times the net profit. Listed companies are typically valued at 12-15 times their net profit. The more systematised the business the higher the valuation.
Of course, even if you don’t intend to sell your business any time soon, the attraction of owning a business that is a marketing machine is obvious. You know where the next month’s sales will come from, be confidant that you can bring in new staff and can afford to pay them and invest in growth, and know, when you are not there, the sales are being made just the same way as if you were.
When you make the effort to turn your business into a marketing machine, it is an investment that pays for itself many times over, year after year.
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Dr Greg Chapman is the Director of Empower Business Solutions and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.
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