The Number One Destroyer of Business Valuation – You

Posted on July 16, 2012 · Posted in Blog

To truly create value in a business, an entrepreneur must cross the bridge from “working in the business” to “working on the business.”  What that means is stepping away from the daily operations and looking at your business as an asset that generates cash separate from yourself.

If the owner or a few key employees are the engine that drives the business, what happens to the business when they are removed?  In many cases, the value of the business – as a separate cash flowing asset that can be sold to another party – goes away.

The keys to your success may also be the biggest destroyer of value.   If you or your key managers can’t be away from the business for an extended period of time, how can you expect to sell the business to an outside party for a significant amount of capital?

Of course no one knows more about the business, the industry, leading, motivating then you, but you know what?  Who cares!!  If you leave, the business is gone

I believe the best book written on this subject is “The E-Myth” by Michael Gerber.  If you can’t get the book, then just remember one concept…If you can’t separate yourself from the business then you have a job not a company.

Of course when you start and grow a business you have to handle all the day to day tasks, fight the alligators and be a jack of all trades.  However, when the time comes to create value and think about exiting, you have to work on the business not in the business.   What does this mean?  Hire the right people, set up programs and establish processes that enable others to run the business.

How do you do that?   That’s the million dollar or multi-million dollar question sellers of businesses for the highest value figure out.   Have you?

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