Imagine a horse who could win his race in any track – Firm, Good, Heavy, didn’t matter.. place the bet and not only win your money back – but multiple times in return!
Who wouldn’t want to keep betting on that horse.
Well in a sense, as a business owner, you do have a horse you can bet on.
The underlying value of your company.
Like a horse you train from a colt to become a champion, so you can train your business to become more faster and valuable day by day.
There are many factors that make your business valuable, but your profits (or technically your free cash flow derived from EBITDA) are one of the key factors.
Every dollar of additional profit can mean a multiple increase in value down the line. For example, an extra dollar of profit can mean three, five, or even more dollars when you sell out.
So if you are considering selling soon or even just trying to maximize your company’s worth now, it makes sense to really look at what could be improved both in terms of revenue and expenses.
To do this, try following in the footsteps of Derek Morin.
Morin founded Tabarnapp and knew his way around a Profit & Loss statement, but when he bought out his business partner (who was handling the finances) he got serious about finding every dollar of profit available.
Morin proceeded to quickly assess each entry on the P&L and decide what action should be taken for each one. He looked at it as a game – a challenge to squeeze out a few more dollars of profit each month.
He called it the PURE system.
A four-letter system to help him identify areas where he could make positive changes:
- P (Plus) for extra profits;
- U (Unnecessary) for expenses to eliminate;
- R (Replaceable) for costs that can be swapped out for cheaper options; and
- E (Equal) for items that should remain untouched.
And it worked! When Morin bought out his business partner in 2020, the company was valued at $400k – two years later he sold it for nearly ten times that amount!
Of course, there is a message here. If you’re not careful with the details and you treat your company like it’s your personal piggybank, mixing personal and business expenses, or worse – sacrificing profits to save on taxes, then the value of the business could suffer when it comes time to sell.
So keep your P&L PURE in order to make sure your business is worth as much as possible.
It won’t be easy – but if you can pull off what Derek Morin did and find those extra dollars every month, you may just win your own derby at sale time.
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