Business Worth: the Difference Between Profit and Value
Let’s face it: all that glitters, really is not gold. Your business might be profitable. It might be busy. It might be satisfying, particularly in the short term, but the real business worth depends on much more than appearances, activity and near-term profitability.
Many business owners assume that what their business is worth to them right now in terms of profit and satisfaction is the same as what it is or will be worth “on the market.” What they don’t realize is that in order for the business to be worth that much in a sale, it must be worth that much independent of current ownership. If the value changes when they leave, they have some work left to do in order to be ready to reap the true potential if and when they want to sell.
The Value of Waiting: Building Business Worth Instead of Selling Now
Before you can sell a business, you need to know what it’s worth to OTHER people. That takes time, expertise and information. If you feel like you’re rushing into something, or going into it “blind” then you’re probably right. Even if you feel emotionally prepared to transition your business, your business may not be quite as ready.
“To build a business as an asset, you have to become a value accelerator who looks beyond whether the business’ profits are sufficient to maintain your lifestyle. It means looking at the business as an entity outside yourself. You need to look beyond revenue and profit,” according to a Mass Mutual Sponsored Content Article in The Business Journals titled Are you living for today as a business owner or building value? by Kent Bernhard.
Being objective and far-sighted enough to assess and drive true business worth well in advance of a sale or transition is tricky for many - if not most - closely-held business owners.
Consider the Alternatives
If you’re contemplating a sale but not sure if your business is ready, it would be well-worth your time to pause and consider your options before proceeding. Learn more and/or take an assessment.
We are the W Alexander Group, headquartered in Cincinnati. We are not consultants or business brokers. We are private investors who work in active partnership with owners to provide an alternative to selling the business now through strategic and operational guidance. Our uncommon approach protects owner equity and provides an interim step, allowing for a more planful change and down-the-road sellability when you are ready to transition.
Reach out to us. We would love to talk to you.