Business owners often ask me how their business is valued.
I answer with a simple story.
Imagine I’m holding an auction for a promissory note that could either pay you $1 million in a year or nothing at all.
How much would you bid for this promissory note?
Most likely nothing because you don’t have the details nor the confidence to invest in such an asset.
Without investor interest, this promissory note is worthless.
Now how much would you pay if the $1 million is fully funded and in a guaranteed escrow account?
If someone bids $1,000 would you be willing to bid $10,000?
How about $50,000 would you bid $500,000?
Or $800,000 would you bid $900,000?
How high do you think the bids would go?
What is the difference between the two scenarios?
Simple.. Risk.
The escrow account makes it much more predictable and certain that you would be paid…so you would be willing to pay much more to get that $1 million.
The first scenario is just a promise with no guarantee and huge risk that you won’t get paid.
So, you probably wouldn’t want to pay much, if anything at all.
If you want to sell your business someday, what is your business telling potential investors?
An opportunity for strong predictable growth or the risky haze of big promises that boil down to whatever happens?
Now you can begin seeing why 7 out of 10 profitable business owners fail to sell their companies.
These are smart and successful business owners but yet the business they build has no value outside their direct control.
Want to find out how to avoid that fate and boost your business at the same time?
Get a head start by logging in or joining the Business Owners Club. Access the presentation I gave to Dubai Media City companies on how to attract an investor by making him confident, comfortable, clear and excited to invest in you,
P.S. Building Legacy and Lasting Value for Business Owners
I help business owners break free from the daily grind to lead with impact, boost value, build legacy, and set up for a successful exit—creating the life they dreamed of, starting today.
Discover how our Socratic Success System brings clarity and tailored solutions, so you can make real, lasting changes with ease.
Find out more at Sophiall.com and on my LinkTree.