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| HOW DO YOU VALUE YOUR BUSINESS? |
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| Succession plan? Exit strategy? Liquidity
model? |
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Liquidity: Most of
us would love to capitalize on the sweat equity in our business. Most often it
is part of the intangible assets and doesn't even show up on the balance sheet.
And, we all know that the simple book value is way too low! All the intangibles
within Big Business get valued within price/earning multiples -- usually
beginning around 6x -- they're hot over 100x earnings. |
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| The key question for small
business is, "Can there be a real P/E ratio when the business is privately
held?" The answer is, "yes." |
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This page extends our on-going dialogue
within SmallBusinessSchool about business valuation, equity and
liquidity for small business. It is based in part on an episode of the show
titled, Exit & Equity. We studied eight
possible exit strategies just to see which path provided the greatest return to
the founder at the same time it assured the greatest probability the business
would survive the founder's exit. Click on their pictures and explore further!
Also, spend some time with
Step 7
and Step
8 within Paths & Steps (sidebar). Also, visit
our website to study
private equity capital. |
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| Understanding wealth and capital formation |
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| What IS a
transaction? |
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Intangible values... the heart and soul.
Business:
Every time you make a good transaction -- exchange something of value for a
fair profit -- your business becomes stronger and your intangible asset value
increases. In this television show you meet some of the finest people on earth
who teach us from the heart of their experience. They love their work. They
love their sales. They love transactions. And though there are no get rich
quick schemes, just a focus on the work of creating something of value, most of
the people have become very wealthy. Wealth is driven by transactions.
 Do you remember these?
No Par
Value incorporation certificates. Most are filed away and forgotten. Have
you ever assigned a value to them? Have you ever asked anybody if they might
want to buy a few shares? Once you do, you've begun thinking about your exit
strategy. When we started our business, we all should've been planning how
we'll end our time in it: (1) A succession plan. (2) A liquidity model. (3) An
equity model. It's all part of the big picture and each of us needs all three.
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| Making Our
World A Better Place |
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