The emotional equity you place on your business is far more than it is really worth (and here’s how to fix that).
Almost all businesses have some sort of saleable asset value, whether you’re planning to sell or not.
Some sell for high multiples because of recurring revenue, sticky clients, unique IP and proprietary products or processes or just because they have significant profits and a business that runs under management.
In the majority of exit conversations I have, I encounter a disconnect between true intrinsic value and the emotional equity owners place on their business.
I get it, you’ve invested years, if not decades of huge hours, stress, sacrifice and compromise to grow your business, in many cases paying yourself a fraction of what you earned in your old job, so you want to be compensated for this.
The problem is that you don’t look at selling from a buyer’s perspective.
When I was a kid my father used to tell me a story about his most valuable asset, an old violin he picked up at a flea market in Chile.
My dad used to recount the circumstances where fate guided him to find this instrument and he managed to get it for an incredible price because the seller didn’t know what they had.
The violin was signed with the name Stradivarius – for those who aren’t familiar, this is the most famous and highly sought after violin maker and typically sells for upwards of $8 million.
The story my father would tell me was typical. He was a perpetual victim of circumstance and the world was always out to get him and keep him poor.
He would tell me how he made a submission to the Auction house, Christie’s for an appraisal. He wrote to them and sent a series of photographs and waited months for a response.
“Mr Millan, we are writing to inform you that your Stradivarius violin is in fact a common replica of the original and at this time we cannot assist in providing an appraisal of its value.”
My father was livid.
He was 100% convinced he was being taken advantage of, they were trying to rip him off and secure the heirloom for a cheap price so they could profit for themselves.
For years he allowed his emotional equity to cloud his judgment.
It was a great yarn, but the violin was ultimately worthless.
There is definitely a place for emotional equity, however, we cannot allow this to get in the way of one of the easiest strategies to fast track your path to financial freedom.
Unlike my dad’s violin, you have plenty of ways to manufacture value into your business and position it for sale.
Over the last 15 years I have identified the top 40 things that maximise the sale value of a business and allow you to get the highest multiple upon sale (in many cases completely tax free).
Most business owners have only got 18 of these strategies in place with some as low as 5!
Don’t allow your business to become the worthless ‘Stradivarius’ that is only good for the yarn and let’s focus on building true intrinsic value.
Work out your 40 point scorecard here.
