Value Drivers: Business Owner Who Works in the Business

Over the next several weeks you will read about keys to business value.  These are some basic drivers that will make your business or the business you are pursuing, more (or less) valuable. We are talking about the attractiveness to a potential buyer in an open market.  Disclaimer: There are lots of different things that can impact the value of a business – and we won’t cover them all.

Sure there are times when some of these drivers don’t impact the value of the business – like if you find a gullible buyer, family member that will be taking it over, a strategic buyer that may focus on only one driver, etc. However, a business owner can’t rely on these buyers to be there when it’s time to sell the business, so it’s better to make the business more appealing to a broad market.

This week the focus is on a Business Owner Who Works in the Business. The alternative is the owner that is working on the business.  If the owner is working in the business, i.e., driving the truck, running the machinery, or making the sales calls, then the potential buyer pool has been shrunk to those who can fill those shoes, and fill them well. A potential buyer would have to possess the same technical expertise of the current owner.

You’ve probably heard the adage “Work on the business, not in the business.” There are good reasons why consultants and professional advisors repeat this. First of all, if you are working in the business, you will get really tired and not be able to put energy into growing and enhancing the business. (The E-Myth, by Michael E. Gerber, has some good examples of how working in the business can bring it down.) The impact on business value is dramatic. Is a buyer of the business buying a job – or buying a system, a brand, a process, etc.? We do have buyers that are interested in “buying a job”, but they are a small population and are also very selective.

Call your Apex Business Advisor for more information.