Why Value is More Important than Profit
While completing my CEPA certification last year, it was so exciting and validating to see that the same strategies that I help my clients focus on in their small businesses were also what mid-cap businesses of up to $30M in revenue used to grow, increasing their profits AND value of the business.
When it comes to the business world, there’s a lot of focus on profit.
It’s obvious why:
Without profit, your business won’t continue to exist.
But, unfortunately, focusing on profit alone can be detrimental to your business.
What often happens in business is this: entrepreneurs are so focused on turning a profit that they neglect to make crucial investments that will ensure sustainable growth (and increase value).
This mistake:
Keep them centralized and stuck in the weeds of their business
Prevents them from hiring key employees or creating systems and processes that allow growth and freedom
Causes them to continually want to cut spending that’s crucial for growth to increase profits
In the Exit Planning industry, we refer to a business with a dependent business owner (no systems/processes/key employees) as a lifestyle business.
A lifestyle business is not transferable or saleable.
It means that if the lifestyle business owner wants to retire or sell their business one day, they’ll probably fall into this sad statistic:
80% of businesses put on the market do not sell.
In order for you to build what the industry calls a value creator business, you have to start focusing on the factors that will increase the value of your company.
Quick Math:
When you go to sell a business, they will look at your profit, yes.
But they also assign what’s called a multiplier to your business.
Depending on your industry, there is usually a multiplier range, with a bigger and better business being assigned a bigger multiplier.
You can control your sales and cash flow
And although you can’t control the multiplier range itself, you do have control over where your business falls in the multiplier range.
Now you may be going: “But Hanneke - I don’t ever want to sell my business.”
This information is still important to you.
Here’s why:
When you focus on increasing VALUE, you will also:
Free up more time to do things outside your business
Increase your profits which will give you more money to invest in your retirement funds
So how does one increase the value of your business?
Stay tuned for our next blog post next week called: The Valuable 4 C’s of Business.
How can we work together?
If you liked what you read here, and you’re curious to learn more about business coaching, you might also like this other article I wrote: How can a business coach help me?
And here are a few more ways you can get more support from me to become the best entrepreneur you can be:
Accelerate your growth with this free handy download
Read my bestselling book, The Up Level Project
Join my group accountability program: Business Growth Achievers
Work with me: Book a 1:1 consultation with me here
