Know the formula for achieving your future euphoric exit event
Too many private business owners believe the formula for achieving a euphoric outcome from the sale of their company one day is to focus on building their revenues and profits. Although this is a good start, realize this is the actual formula; Euphoric Outcome = 20% company tangibles + 80% company intangibles.
The tangibles of your business are the financial statements; P&L, Balance Sheet, Cash Flow statement and when the day arrives you want to sell, an acquirer is going to place 20% of their valuation of your company on these tangibles. The 80% of their valuation is going to be on your intangibles, things like;
- No reliance on you as the owner…it can operate successfully without you going forward
- Quality of revenue from a cross-section of customers versus a concentration on just a few
- A strong team and culture that can continue the success of the business
- Predictable revenue streams that the acquirer can enjoy
Too many private company owners believe the formula for receiving a great payout from an acquirer is presenting a business with great revenue and profit. This is the ante into the exit game. The majority of the valuation is going to be from your intangibles, the things that will enable the acquirer to experience success going forward under their ownership. As you build your business, of course building year over year financial performance is important to one day selling your business. But know that the acquirer is going to really take a close look at the intangibles of your business to determine if it’s worth paying a premium. Use time as a friend to build these intangibles and increase the likelihood of one day achieving your euphoric exit event.
To help you on this journey, visit our video channel with actionable insights on building toward your future euphoric exit event. (Euphoric Exit Event Planning)
