Have you heard these myths about small business exit strategies? Myth 1: The value of your business is solely based on net profits. Myth 2: Customer service is the ultimate differentiator. Myth 3: Emotion and identity play no role in business value. Want to know the truth behind these myths?
Building a Valuable Business: Lessons from An Expert Business Coach
In this episode of Napkin Numbers, Scott Lundt and Rahsaan Freeman speak with Denver Business Coach Steve Kohnke to dispel these myths.
Throughout the episode, key factors impacting a business’s value are uncovered, shedding light on the risks associated with owner dependency, emotional attachment, and lack of differentiation. By addressing these factors through intentional strategies, small business owners can mitigate risks, increase operational efficiency, and ultimately boost their companies’ attractiveness to potential buyers.
Understanding the key factors impacting the business value is crucial for owners looking to optimize their exit strategies and achieve maximum value upon selling their businesses.
Napkin Numbers Talking Points
[0:37] Exiting on Your Terms
- Steve emphasizes the importance of business owners exiting on their own terms and schedule.
- He highlights the risks of dependency on the owner, key employees, customers, and suppliers and the need to separate the owner from the business.
[1:20] Business Risks and Emotions
- The conversation delves into the emotional attachment of business owners to their businesses and the impact on value growth.
- The discussion also touches on the significance of brand value and its influence on the selling process.
[8:15] Valuing the Business
- Steve discusses the misconception of using a simple multiple to determine a business’s value and highlights the need for a more comprehensive analysis that considers industry benchmarks, intangibles, and risks.
[11:50] Differentiating the Business
- The conversation explores the importance of identifying real differentiators for a business beyond competing on price or customer service.
- Steve shares how training employees to think like entrepreneurs can create value and set a business apart.
[14:25] The Power of a Strong Team Culture
- Steve discusses the importance of having a fully committed team and bought into the company’s vision and values. A strong team culture results in better service and increased business value.
[14:38] The Intangible Factor of Culture
- Scott and Steve emphasize the significance of a solid company culture when looking to sell a business.
- They highlight that a strong culture can make a business more attractive to potential buyers and increase its valuation.
[15:08] Attractiveness to Financial Buyers
- Emphasis is given to the importance of building a business that is attractive to financial buyers.
- They stress that having the right people and culture can raise a business’s valuation and make it more appealing to potential buyers.
The importance of business owners exiting on their own terms and schedule is paramount. Emotional attachment, accurate assessments of brand value, misconceptions about valuation, real differentiators, and the power of a strong team culture are all factors one must consider when attempting to attract financial buyers and ultimately increase their business’s value.
If you want to sell a business, please use our complimentary business evaluation calculator to determine its value.
Discover more about Steve Kohnke:
