So what’s my business worth?

People make the process of business valuation just too complex. It is really much simpler than most realize. The best way to think about the value of your business is to understand how a buyer will look at it. Simple idea, right? But in the days when we were looking at buying other people’s businesses I never ceased to be amazed by how convoluted some entrepreneur’s thinking was about the value of the business. One woman insisted to me that her business was worth $800,000 because that was how much more she needed to retire in the life style she had planned for herself. When I carefully explained to her that her business was only worth about $100,000 based on her cash flow. She became enraged, and said, “But I deserve that money!! I worked too hard to get anything less!!!”
Rodent Regatta offers a very clear picture of how a buyer thinks about valuation. Just as it is critical to “think like your customer” to be successful in growing a business and to think like an investor or banker when seeking funding, an entrepreneur must learn to think like a buyer when the time comes to exit the business through a sale. Unrealistic expectations lead to a dead end, not a successful exit.