So, what's your business really worth?
What price you get for your business on it’s eventual sale is generally a multiple of the net profits of the business – and if you're able to increase the multiple, that can make a significant difference to your wealth to move on.
The multiple is not only an industry standard. It can be based on a number of indicators in the business which can increase OR reduce the multiple.
For instance, do you have a sales pipeline, a CRM? Does your business receive cash? If you’re not banking cash to avoid tax, then you’re not receiving a multiple on this income which is much more lucrative. For instance if you don’t declare $20,000 pa cash for 3 years, you might save $18,000 tax, but you will forgo $100,000 if you receive a multiple of 5 on the cash flows.
Are you aware of your current levels of work in progress? If you’re not including this in your results, how does this affect your profit? What are your utilisation/productivity rates? Are top performers wasting their time on sales or administrative tasks?
Do you have cloud systems in place that allow your financial data to be analysed and responded to in real-time, are there some costs – maybe private - that you’ve been meaning to analyse and remove from the profit, and do you have other key people in place to make the business less dependent on the owner?
An eventual sale of your business may seem a distance away, but it can come around quicker than you think and it can certainly pay dividends by commanding a premium price, if you have your governance in order.