Ep 235: Is Your Business Ready for Sale? Find Out Now!

So today we are going to talk about some ways to make your business more sellable and attractive to potential buyers.

We are going to talk about some ways to make your business more valuable to potential buyers.

And during the course of all of this, your business will become more profitable and easier to run.

So we are going to talk about looking at your business as an asset and talk about some ways to increase the value of that asset.

So I hope that you enjoyed this episode and and here we go.

Welcome to the weekly Wealth Podcast.

I am certified financial planner David Chudick.

This podcast and my wealth management practice are both designed to help the mass affluent to live better lives by how they handle their money.

We talk about financial strategies, prosperous mindsets, and simply how to build true wealth.

So come on and let's enjoy this journey together.

So when I mentioned the word asset, what do you think of?

Do you think of maybe your home?

Do you think of real estate?

Do you think of your brokerage account?

Maybe do you think of your 401k?

Or maybe you think, hey, I have an asset, I own some Apple stock or I own some Nvidia stock.

And yes, those are all assets.

But if you're a business owner, I want you to continue to think about your business as an asset and I also want you to think about how you can increase the value of your business, which is an asset.

So today we're going to talk about some ways that we can make your business more marketable.

We can talk about some ways to make your business more sellable.

And on the way, you should have an easier and more profitable life.

But before we get started, let's make sure to do all of the things.

Forward this episode to one of your business owner friends.

If you're a business owner, the odds are you are friends with other business owners and I hope that they would find this information valuable as well.

Also, don't forget to check out our Instagram channel, our YouTube channel, and our Facebook.

We're doing the best that we can to put out content that's different, that's enlightening, and that gives you some innovative solutions.

So I've been mentioning it fairly frequently recently on the podcast and I've been saying that this podcast is a marketing tool for my wealth management practice.

So I put the weekly wealth podcast out so you can get to know me and you might decide that you would like to work with me personally as your financial advisor.

So as a certified financial planner, I work within the financial planning process and I help individuals and I help business owners to work to make their goals become a reality, if it is possible to make them a reality.

So we go through a process and we help our clients to make smart financial decisions for them for the reasons that are important to them.

But in addition to that, I am a certified Value Builder advisor.

So a few years ago I got involved with a great company called Value Builder Systems and I can help business owners to make their businesses more sellable.

And again, your business is more than likely your biggest asset and it's also the asset that you have the most control over.

So why not, as part of your financial planning process, work on making your business more profitable?

So there are eight drivers of company value and I'm gonna talk very briefly about each of them and then I would like for you to take some time and take the Value Builder score.

Okay?

So you can take the Value Builder questionnaire.

It takes you 10 to 15 minutes.

You can go to www.weeklywealthpodcast.com valuebuilderscore and that'll take you right there.

But let me ask you a question.

Are you a business owner and is your business a train wreck?

Would you buy your business from you if you knew everything about it that you know?

Or let me ask you a better question.

Would you negotiate a huge discount on your business because you know of all the problems that it has, or would you be willing to pay a premium because you know that it's a well oiled machine with great financial performance and needs minimal involvement from the owner?

So that's the first thing that I like to ask business owners is would you buy your business from you knowing everything that you know about it?

And if the answer is no, there is some time to fix some some of those problems.

Business ownership can be incredibly rewarding, but it also can be very difficult.

As business owners, we have to know a lot.

We have to know our trade, we have to know the running of the business, we have to know how to market, we have to know human resources, we have to know bookkeeping, or we have to know who to hire or outsource all of these items to.

So let's start off, let's look at eight drivers of company value.

Okay, so here we go.

Let's take a look at each of the eight drivers of company value for your business.

And we'll spend a minute or two on each one.

And then if you'd like to discuss how these impact your business specifically, make sure to email me davidarallelfinancial.com so the first one is financial performance.

And this is really just your history of producing revenue and profit combined with the professionalism of your record keeping.

So are your books accurate, are your books dependable?

And quite frankly, is your business profitable?

Obviously, nobody's going to pay a high premium price for a business that is not profitable.

This is where it becomes very important to me.

Making financial decisions for your business based on your accounting, based on your profit and loss statements, based on your statement of cash flows.

We need to know what our profit margins are and we need to know that we are profitable and we need to know the activities that are driving our profitability.

Okay, number two, growth potential.

What is the likelihood to grow your business in the future and at what rate?

So a buyer is typically buying what they believe that the business will do in the future.

So if you're in a dying industry, the value of your business may not be incredibly high.

Number three, the Switzerland structure.

How dependent is your business on any one employee, any one customer, any one supplier, or any one thing?

Let's say that my business has one salesperson who's accounting for 95% of the revenue.

Yeah, that may be an exaggeration or a strange example, but just work with me here.

How much would you buy my business for from me?

If most of the revenue is coming from one person, let's say that person dies, let's say they get poached to another company and then all of a sudden you'd be in a pretty bad position.

So make sure that you're not overly rel on any one thing, any one supplier, any one employee, or anything like that.

All right?

What about your valuation?

Teeter totter?

This is whether your business is a cash suck or a cash spigot.

So do you have long periods of time where your cash flow is very bad and you're having to put money into the business, or do you have revenues that are predictable?

Now let's look at recurring revenue.

This is the proportion and quality of automatic aminuity based revenue that you collect each month.

So think of Netflix, think of subscriptions.

Think of these car washes that are popping up everywhere.

Then they just charge your credit card once a month and they know within reason how much revenue they are going to bring.

Make sure that you're differentiating the difference between recurring revenue and reoccurring revenue.

So recurring revenue would be something like a subscription.

Reoccurring revenue might be a restaurant where I go for lunch once a week, once every other week, but I'm not guaranteed to do so.

So more than likely they're going to get Some of my money, but they're not guaranteed to do so.

On a recurring revenue model, there are some sort of an automatic withdrawal, there's a subscription, something like that.

And that gives the owner of the business much more steady cash flow and it also takes out some stress.

So recurring revenue can be huge.

How can you add recurring revenue to your business?

All right, let's look at monopoly control.

How well are you differentiated in your business from the competitors in your industry?

Are you doing something different than the than your competitors?

And if not, why should customers use you?

So make sure that you're doing something differently than your competitor.

Now your product could be different and better, your service could be different and better, or you could just be delivering a client experience that is much better and much different and memorable than your competitors.

So let's think about how we can be different and let's not be the same.

And once we're different, we can be memorable and we will develop a cult like following from our customers.

Number seven is customer satisfaction.

And this is the likelihood that your customers will repurchase from you and also refer you.

Now, most business owners says yes, sure, my customers are really satisfied.

But if you're not measuring this with things like surveys and actually asking your customers, then you are just making a guess and you're not making a calculation as far as what your customer satisfaction is.

And then I don't know that any of these drivers of company value are more important than the others, at least of the first seven.

But I do think that number eight, both for the mental health of the owner and for the value of the business, we all need to get this one right and that's the hub and spoke.

So this is how well the business would perform if you, the owner, were unexpectedly unable to work for a period of three months.

So are you an owner that says, well, if I don't do it, it won't get done right?

Are you an owner who all of the clients call and they expect to speak to directly with you?

If so, your business is simply worth less.

We all need to be building businesses with systems and processes and departments and ultimately have it to where the owner is not necessary for the day to day operations of the business.

So those are the eight drivers of business value.

Let me know what you think.

But here's actually the beautiful thing.

You don't have to let me know what you think about the eight drivers of business value.

You can actually take.

The Value Builder questionnaire takes between 10 and 15 minutes and you can learn which of these areas do you and your business excel in?

And which areas?

Does your business have some opportunity for improvement?

And you also will get an estimate for what your business likely could sell for.

So this is not a certified appraisal, but it certainly is a good starting point for knowing the value of your business.

Quick question When's the last time you stopped to ask where is my money actually taking me?

If you're a business owner or high earner who's too busy to figure out if you're on the right path, we have created something just for you.

It's called the 10 Minute Wealth Vision Call, a quick, no pressure zoom where we'll talk about your biggest financial question and help you get one step closer to your ideal future.

No pitches, no fluff, just clarity, confidence and direction.

Grab your spot now@1weeklywealthpodcast.com vision that's weeklywealthpodcast.com vision.

Your vision deserves 10 minutes and one.

Of the things that I want for all of the listeners of the weekly Wealth Podcast to know those that are the business owners is that being a business owner is truly one of the greatest wealth building tools out there.

But we have to be purposeful about it.

That's why we have an episode coming up where we're speaking with a referral expert that's going to help us to get more referrals for our business.

Now, that's not a traditional financial planning topic, but it is a way to help you to bring more profit into your business, to bring more revenue into your business.

And that is one of the best financial planning tools that there are.

So I hope that you have been enjoying my content for the business owners later and make sure to share it with your business owner friends and your colleagues.

And let's close out this episode with this thought.

Your business is an asset.

Remember, your business is an asset.

Remember, treat your business like an asset.

Remember, grow your business like an asset and give your business all of the attention that a growing and very valuable asset should receive.

Thanks everybody.

Investment Advice offered through Parallel Financial, an SEC registered investment advisor able to conduct advisory business in states where it had registered or exempt or excluded from registration, contents contained herein or for informational purposes only and should not be construed as an offer or solicitation for investment advice or for the purchase or sale of any security, insurance or other investment product.

And here's this week's bonus content for all of our listeners.

So if you are a business owner and you're thinking, you know what, I don't know if I should sell my business.

I may be ready to get out.

I'm not sure what I would do with my life if I did.

Sure what my motivations for staying in business are.

Take the Personal Readiness to Exit Questionnaire.

So go to www.weeklywealthpodcast.com prescore.

That's P R E C O R E. That's www.weeklywealthpodcast.com Prescore.

This will help you just to think yourself through.

Are you ready to exit?

All right, have a great week, everybody.

Thanks.