In order to find the accurate valuation of your business, you need a normalized EBITDA. That’s where recasting financial statements come in. It is used to help calculate the value of your business and is often referred to as normalizing or recasting your financial statements.
As a small business owner, you recognize the word ‘value’. The time and money you’ve invested in your company is valuable. Some of your equipment or technologies may be valuable. But is your company valuable? Is it profitable, sustainable, and scalable? Are you creating something valuable to others, or is it only valuable to you? If you ever want your company to become a marketplace leader, if you want investors to invest money in your company, or if you want to sell your business for profit, you must understand what makes your business valuable to others. Then, you must work to grow the value of your small business. Join me in this new series as I walk you through growing the value of your business.
As a business owner, you’re often so involved with day-to-day dilemmas that you lose sight of why you’re in business, or you lose sight of your business’s potential. Usually, when you lose objectivity, you forget to think ahead. You worry about making money now rather than saving money for your future. You want your business to be profitable, but you don’t know how to properly invest the profits. Inevitably, small business owners become so focused on making a profit that they forsake other areas of their businesses and their personal lives. They think they have to choose value versus profitability. However, by growing a company’s overall value, small business owners can increase their company’s profitability and their personal sustainability.
In my last article, I told you that a business’s value and its profitability are different things. If you chase quantitative profits without making changes to your qualitative assets, you will stifle your business’s growth in value. But if you’re trying to make your business more appealing to investors, customers, or buyers, what type of value should you be increasing? In this article, we will be discussing the types of value in business and which you need to be focusing on for growing the value appraisers look for in your company.
It’s one thing for me to tell you that you should increase the intrinsic value of your business if you want to attract customers, investors, or buyers. It’s another for me to tell you how to increase that value. Before I can, you need to understand how business valuation works, from an appraiser’s perspective. So, we’ll discuss the three most common businesses valuation approaches appraisers use.
Having a profitable business with consistent and predictable cash flow is important to your company’s survival. However, if cash flow, revenue, and profits – the quantitative sides of your business – are the only things you seek to improve, then the qualitative sides of your business will suffer. Although it’s easy to identify your business’s quantitative factors, it’s harder to identify it’s qualitative factors. Thus, I want to identify eight foundational components that drive up your business’s intrinsic value – its qualitative worth.
By nature, entrepreneurs are passionate, driven, and courageous, ready and willing to charge hell with a water pistol. Yet, many business owners are poor planners. Author and businessman John L. Beckley said it best: “Most people don’t plan to fail. They fail to plan.” Oftentimes, you’re so consumed with daily business operations that you don’t take time to plan for the future. Inevitably, you experience set-backs and failures that keep you in a hamster wheel of day-to-day worries. But there’s hope. By instituting a business planning process within your company, you can disrupt your present weaknesses enough to make them tomorrow’s strengths.
As a business owner, you’ll do several different types of planning throughout the life of your business. Although all planning methods are important, one type of planning stands apart from the rest. When you’re trying to increase the intrinsic value of your company, strategic planning is vital to accomplishing your goals. Therefore, I’m going to give you a strategic planning framework to follow when you’re planning to grow the value of your business.
In our Value Growth Series, I’ve identified 8 fundamental areas of your business that can drive up its intrinsic value. I’ve told you that strategic planning is the type of planning you need to do to positively affect the value of your business. In this article, I’ll begin reviewing the pieces of the strategic planning framework. Specifically, I’m going to talk about the difference between business vision and mission, and how they affect your business’s long-term outlook.
Your values are important – guiding your actions along life’s journey. Likewise, your personal values affect your business life as well, driving your decisions and your performance as a small business owner. We’ll discuss these values so ideally you can align your business’s vision and mission with them and hire people who align with you.
As a business owner, you’ve probably heard of a SWOT Analysis – a process where you identify your business’ Strengths, Weaknesses, Opportunities, and Threats. However, performing this analysis is nothing more than a time-consuming exercise unless you can put its results to good use. You need to spend time working on those shortfalls. In this article, you will learn how to do and implement a SWOT analysis to increase the value of your small business.
Anyone can write out objectives, but few seem to achieve them. Maybe people lose sight of a vision or forget their mission – their reason “why”. Perhaps day-to-day worries get in the way of future success. As a business owner, you can’t set objectives for the future and “hope” you achieve them. Only ACTION will make your business better. Therefore, during your strategic planning sessions as you’re mapping out how to increase the value of your business, you must set long-term objectives in your business that can actually be achieved. Let me show you what works for me!
If you’re trying to build a business that’s valuable, to whom is it valuable? Do you want to improve your business for yourself? Your family? Employees? Customers? Why does improving your business even matter? Well, it may not matter if you want to close it and walk away from it down the road. However, if you want to sell your business in the future, then building value in your company matters a great deal. Ultimately, the quantitative and qualitative value of your business will determine how much a buyer will pay you for your business. Your final customer will be your business’s buyer. Therefore, you must make your business attractive to them. But how do you do that? Well, I’m going to give you the list of 6 aspects that business buyers look for when assessing a company.
Jeff Bezos, founder and executive officer of Amazon, once said, “What we need to do is always lean into the future; when the world changes around you and when it changes against you – what used to be a tail wind is now a headwind – you have to lean into that and figure out what to do because complaining isn’t a strategy.” I fully agree… complaining is NOT a strategy. Strategies are plans of action. It’s time to stop complaining about your business and start working on your business by developing strategies to meet your objectives and grow your business.
Of the 8 foundational components that drive up your business’s value, 6 are functioning divisions within your company. Here’s what I mean by that. Leaders make plans; leaders and planning aren’t business departments. You, as business owners, give plans to your sales, marketing, HR, operational, accounting, and legal departments to follow. Thus, the team members in those 6 departments implement your plans. Without action and implementation by those functioning divisions, plans cannot become realities. So once you’ve developed strategies to meet your business growth objectives, it’s time for your team members to help you come up with the short-term tactics and actions necessary to accomplish your long-term objectives.
If you Google the word “leadership,” you’ll find definitions, quotes, inspirational stories, movies, books, devotions, planners, and the like. Leadership is a big deal, but I rarely find anything about leadership in a small business setting. Sure, I can read corporate success stories, mountaintop experiences, and tragic circumstances that raised up and inspired leaders. Yet, I rarely find anything written about small business leaders by small business leaders. Therefore, I want to give you an overview of small business leadership from a small business owner’s mindset. Through this new mini-series, I want to show you what effective leadership looks like in your company and how it can raise the value of your small business.
As a small business owner, one of your many jobs is to lead your company to greatness. Yet, not all business owners are leaders, and not all leaders are small business owners. Sometimes, you have to work on your own leadership skills to become the effective leader your company needs you to be. Other times, you need to raise up good leaders within your business to take your company to the next level. Either way, you need to be able to identify the leadership must-dos.
When it comes to leadership, there’s no expert I rely on more than American author and pastor John C. Maxwell. As a companion book to his 21 Irrefutable Laws of Leadership, Maxwell wrote The 21 Indispensable Qualities of a Leader Becoming the Person Others Will Want to Follow. I’ve got to tell you. This is one of the top 10 books I recommend business owners read. For me, it’s powerful. So much so that I’m going to share with you my take on what I learned from the book, as a Certified Value Growth Advisor… the list of leadership qualities of successful small business owners.
You have heard me say that leaders motivate and inspire others. They look into the future and see the big picture of the company. At this point, you may be thinking, “That sounds like a manager to me.” Well, that’s not exactly correct. Management guru, Peter Drucker talked about the distinction between managers and leaders. Specifically, he said, “Management is doing things right. Leadership is doing the right things.” I realize that there is little difference between managers and leaders in Drucker’s play on words. However, there are distinct differences between small business leaders and managers.