DO YOU KNOW YOUR NUMBER?

 

whats your number

When you sell your business in 3 years, 5 years, 10 years or beyond….do you know how much money you want to be deposited in your bank account?

You have invested many years of hard work, risk and innovation so what is your number?

How much do you intend selling your business for so you can maximize your exit?

Most business owners do not give this any thought which is tragic and they do not achieve the financial freedom they deserve for all their years of toil.

There are two types of thinking…..and you must avoid one!

1.    Opportunistic

Most business owners are opportunistic. They struggle with the day-to-day operations of their business and focus on what is appealing.

2.    Strategic

The great business leaders like Richard Branson, Mark Zuckerberg etc..are strategic in their thinking.

They have a clear vision. They have their numbers and work towards them with complete focus.

So, what is your number?

Let’s work through an example.

Let’s say your number is $1 million.

Your business is currently making $200k EBITDA

There are 2 critical variables to establish your business valuation:

1.    Profits

The business profits or commonly referred to as the ‘EBITDA’ [Earnings Before Interest, Taxation, Depreciation and Amortisation].

2.    Multiples

This the figure [usually between 1-10] that is multiplied to the EBITDA.

So, for this example, let’s say it’s $200k x 3 = $600k

Your business is currently worth $600k but your number to maximize your exit is $1 million.

How can you bridge the $400k?

There are 3 options:

  1. The profits need to increase by 66% from $200k to $333k but the multiple remains the same ie at 3 so $333 x 3 = $1 million
  2. The multiple needs to increase by 66% from 3 to 5 but the profits remain the same ie $200k so $200k x 5 = $1 million
  3. The profits and multiple both increase by 33% so the new figures are $266k x 4 = $1 million.

The key point with option 3 is that you can achieve smaller percentage movements with both variables to achieve your objective. It doesn’t have to equally shared, it can any combination.

It is more realistic.

Why is it critical you know your number?

You are then able, each year, to track it.

Are you behind schedule, on schedule or ahead of schedule?

The principles are the same whether your number is smaller eg $500k or larger eg $5 million or more.

Almost all business owners get up every morning thinking about income and increasing income.

Very few get up every morning thinking about equity and increasing their equity.

This tells you what you ought to be thinking about.

So you need to answer these 4 questions:

  1. What is your number?
  2. What is your current value?
  3. What is the gap?
  4. How are you going to bridge that gap?

To discover how you can maximize your exit and receive a generous 75% discount go to www.maximizeyourexit.com/sell-smart-net-what-youre-worth-t

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