Show notes
To increase the value of your business, consider this: If your business burns down, you don't want that to happen, right? But if your business burns down and you've got whatever, desks and furniture and things like that, that stuff's all insured. You should be able to come back from that okay.
But if your book of business burns down, right? If you still have all this overhead, but you don't have that book of business anymore, you are really in trouble. Because if you've got desks and you've got furniture, and you've got technology and everything, and you don't have the ability to sell to the people that you need to sell to, at that point, what's that really worth?
All of that becomes overhead.
David: Hi, and welcome to the podcast. In today's episode, co-host Jay McFarland, and I will be discussing building the value of your business. Welcome back Jay.
Jay: Hey, I'm so glad to be here, David. And once again, you hit me with another term where I'm like, do I really know what the value of my business is? And value has such a different meaning for so many, right?
Value could be. Well, it gives me free time. I hate my business, but it gives me free time. So it's of great value. Or it's of great value because I have all these shiny toys, you know, those types of things. So I think value could be very different for different people.
David: Yeah, it absolutely can. Particularly when we're thinking about business owners versus salespeople.
I mean, when I was thinking about the topic, the value of your business, meaning what would it be worth to someone else if they wanted to buy it from you? And what that means for a business owner is what someone would actually pay for the business. What it means for a salesperson is what is your book of business worth?
If you're building something up and somebody wanted to buy your book of business, what would that be worth? That's what I was thinking of in terms of value, but you touched on a lot of other great points regarding the term.
Jay: Yeah, like I said, there's so many other things. And I've talked to people who have said, yeah, I'm thinking about selling my business.
And I ask them, well, what's it worth? And they look at me like I have no idea whatsoever. In fact, I was working for Kinko's way back when, when they wanted to sell. And they wanted to go public first, and the SEC came in and said, you don't know what you own. You don't know what you owe. You don't know anything about your business.
You have the worst paperwork system we've ever seen in our lives. You're not going public. And so they went and found a private buyer, which was FedEx, who went and bought FedEx Kinko's. So just in how you manage your business can affect the value of that business.
David: Yeah, absolutely. And for a lot of people, the value of their business isn't going to be FedEx Kinko's worthy, very likely.
Jay: Yeah.
David: But still, it's good to know. And, for some it might be worth more than that. But for most people, particularly small to medium sized businesses, when they're looking to sell, they really don't have any idea of what the business is worth or what it could be worth to someone else. And in different industries, there are different metrics and multipliers that people use.
They say, okay, well, we're going to take a multiple of your net value. In other words, what is, bottom line, after owner's compensation and things like that. They have a number of different metrics that people use. But in a lot of cases, that's what it boils down to. What's it likely to be worth to someone else?
And Glen Holt, who was a professional in the promotional products industry for a long time, one of my mentors in the early days,
But if your book of business burns down, right? If you still have all this overhead, but you don't have that book of business anymore, you are really in trouble. Because if you've got desks and you've got furniture, and you've got technology and everything, and you don't have the ability to sell to the people that you need to sell to, at that point, what's that really worth?
All of that becomes overhead.
David: Hi, and welcome to the podcast. In today's episode, co-host Jay McFarland, and I will be discussing building the value of your business. Welcome back Jay.
Jay: Hey, I'm so glad to be here, David. And once again, you hit me with another term where I'm like, do I really know what the value of my business is? And value has such a different meaning for so many, right?
Value could be. Well, it gives me free time. I hate my business, but it gives me free time. So it's of great value. Or it's of great value because I have all these shiny toys, you know, those types of things. So I think value could be very different for different people.
David: Yeah, it absolutely can. Particularly when we're thinking about business owners versus salespeople.
I mean, when I was thinking about the topic, the value of your business, meaning what would it be worth to someone else if they wanted to buy it from you? And what that means for a business owner is what someone would actually pay for the business. What it means for a salesperson is what is your book of business worth?
If you're building something up and somebody wanted to buy your book of business, what would that be worth? That's what I was thinking of in terms of value, but you touched on a lot of other great points regarding the term.
Jay: Yeah, like I said, there's so many other things. And I've talked to people who have said, yeah, I'm thinking about selling my business.
And I ask them, well, what's it worth? And they look at me like I have no idea whatsoever. In fact, I was working for Kinko's way back when, when they wanted to sell. And they wanted to go public first, and the SEC came in and said, you don't know what you own. You don't know what you owe. You don't know anything about your business.
You have the worst paperwork system we've ever seen in our lives. You're not going public. And so they went and found a private buyer, which was FedEx, who went and bought FedEx Kinko's. So just in how you manage your business can affect the value of that business.
David: Yeah, absolutely. And for a lot of people, the value of their business isn't going to be FedEx Kinko's worthy, very likely.
Jay: Yeah.
David: But still, it's good to know. And, for some it might be worth more than that. But for most people, particularly small to medium sized businesses, when they're looking to sell, they really don't have any idea of what the business is worth or what it could be worth to someone else. And in different industries, there are different metrics and multipliers that people use.
They say, okay, well, we're going to take a multiple of your net value. In other words, what is, bottom line, after owner's compensation and things like that. They have a number of different metrics that people use. But in a lot of cases, that's what it boils down to. What's it likely to be worth to someone else?
And Glen Holt, who was a professional in the promotional products industry for a long time, one of my mentors in the early days,