How To Maximize Business Value Before Selling
Want to increase the sale value of your company by millions? Dive into the world of the Four Exit Habits™ and learn how to redefine and optimize your business practices.
One question that often niggles at the back of the minds of founders and business owners: "How do I maximize the value of my company for a potential sale?" Our founder Lien, with her two decades of experience in crafting frameworks and methodologies, breaks it down using her trademarked Four Exit Habits™.
What are the Four Exit Habits™?
At its core, the Four Exit Habits™ is a simple yet effective acronym. Here's a quick overview:
E – External Habits: This relates to how a business brands and markets itself. A classic example is the shift from personal branding to company branding.
X – Expansion Habits: The cornerstone of growth. It includes elements like growth potential and creating a blue ocean to stand out and have pricing control.
I – Internal Habits: The backbone of your company. This habit dives deep into the organizational structure, from team dynamics to decision-making processes and the implementation of SOPs.
T – Tangible Habits: The quantifiable metrics of success such as revenue, recurring revenue, profit, customer satisfaction, and other measurable parameters.
Getting these habits right can mean the difference between a lackluster exit and a sale that’s worth millions. More so, aligning your company with these practices might even make you rethink selling. After all, who wouldn't love to helm a smoothly sailing ship?
The Crucial Role of Revenue
It's a common misconception that businesses under a certain revenue threshold aren't valuable from a buyer’s perspective. We love to debunk this, highlighting that while businesses under 2 million in revenue can be sold, surpassing this threshold often indicates to buyers that the business can operate without the founder's constant involvement.
However, not all revenue is created equal.
For instance, if a business pulls in a cool million from one-time payments, it might be valued at around half a million. Yet, if that same million is generated from recurring revenue streams, the valuation could skyrocket to between 2 and 3 million. That’s the magic of recurring income!
High Ticket Offers and Recurring Revenue
In the coaching realm, it might seem tempting to aim for a few high-ticket offers to hit those revenue milestones. Sell 20 coaching packages at 100K each, and you've hit the 2 million mark, right? While that might be true, this type of revenue is heavily reliant on the person running the business, making the business a hard sell.
On the other hand, recurring revenue – the kind where money keeps flowing in until a client actively cancels – is a gold mine. Don’t confuse this with payment plans, which aren’t considered recurring revenue. They’re essentially loans given to clients over time.
Ready to Shift the Value Needle?
Your business's value isn't just in its current revenue or client list. It's in its potential, its practices, and its alignment with practices that buyers find valuable. And if you're curious about where your business stands, consider diving into our Big Exit Assessment™ or booking a call to delve deeper.
