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Value Is in the Hands of the Moneyholders

You deserve to get more money from the business today and whenever you decide to transition it to a key employee, a family member, private equity, or some strategically motivated company. You need to have more time for your life and for your family.

Ever heard someone say you should sell on value, not on price? An ideal equation for business is:

Value > Price > Cost = Profit

Finding how to create value is not easy for most small businesses. Entrepreneurs such as Elon Musk, Steve Jobs, Jeff Bezos, Mark Zuckerberg, and Travis Kalanick have figured out that value is a future promise. Often, it is one built on HYPE — a Heady Yarn on Price/Earnings. In fact, many times these high-flying, highly-valued companies have NO earnings. For the rest of the businesses, valuation is more tied to real earnings, discounted for future expectations. Moneyholders include banks, investors, potential buyers of your company, family members, and partners wanting to exit. See what the value of your company is by clicking below.

BizBuySell is one source of information on small business valuations. They recently released the Q2 2018 report. It shows a healthy economy with the sale of small businesses increasing. It shows an average of 2.3 times cash flow or 0.6 times revenue as the average multiple. That’s significantly different than the huge multiples we read about almost daily in the news on the internet. Another source is Chinook Capital Advisors. Their 1H 2018 report for the Pacific Northwest shows multiples of 6-9 times EBITDA for companies that have larger enterprise valuations of $10 million to $250 million. That’s still short of the multiple Jama Software raised recently. They raised $200 million for a company with estimated revenues of $20 million. If the estimate is correct, that’s 10 times revenue and an even higher multiple of earnings. Business Brokerage Press has a good, short blog on the topic of Privately Owned Business Valuation.

I’m a business accelerant. I’ve been working to build profitable businesses throughout my career. I’ve worked with startups and Fortune 100 companies. I’ve done crowdfunding, Angel Investing, helped raise money from private equity and venture capital, and helped with mergers, acquisitions, divestitures, and sales of companies. I’ve held leadership positions at General Electric, Eaton, and Daimler. I’ve worked with the largest consulting companies in the world, such as McKinsey & Company, Roland Berger, and the Boston Consulting Group.