Hi
I was talking to a buddy about how Wall Street establishes value on a business and how he, with a very minor adjustment, can earn far better monthly income and build a business that will legitimately sell for $1 million or more.
Like MOST he just didn’t get it on any level... he didn’t understand how Wall Street recognizes “value.”
Most business owners I’ve trained don’t get it either.
Let me explain.
The primary goal of a business is to maximize the value of the business over the long haul.
Most business owners focus on “making a 100k” and this is why they’re almost guaranteed to fail over the long haul.
Building value (what you can sell one day) is an entirely different level and, from my experience, is more about psychology than mechanics.
Jeff Bezos is the richest man in the world and people called him crazy for many years.
His entire focus has always been to maximize shareholder value for those invested in Amazon over the long haul.
He wasn’t worried about short term appearances or what the media said.
The value of a business is directly tied to the size, sustainability, predictability and growth rate of its earnings.
For those unfamiliar with financial statements, ‘earnings’, ‘profits’ and ‘bottom line’ are all the same thing.
A business will, therefore, sell for a multiple of its ‘earnings’.
The size of the multiple is fairly standard within an industry... but varies wildly from one industry to the next.
A doctor's office will sell for about 1.25 times earnings.
That’s low.
Part of the reason it’s low is the level of talent required to operate a doctor's office.
A dental practice is about the same.
Most incorrectly think a doctor or dental practice would sell for more.
A restaurant sells for a little more at about 3 to 5 times earnings.
A car wash takes very little talent, a very good thing, and will sell for 6 to 8 times earnings.
A successful online business can sell for 10 to 12 times earnings and sometimes more.
An online business can scale quickly which is part of why it’s so valuable.
I’ve spent a small fortune in time, resources and money to create new strategies for my clients.
My accountant wants to kill me because I look like an idiot on my current P/L but it’ll come back in spades over time.
I’m focused on the long haul and not going anywhere.
Bottom line.... what are you building?
Are you focused on scraping out a living or are you thinking big and building value?
Are you needing to manage your psychology so you can experience long term wins / wealth Jeff Bezos style?
It’s another level BIG TIME.
You heard it here first.
Obsessed with your business coaching success,
Paul Inselman
PS: When you feel that you are ready to explore what peace, harmony, financial security and running your business via systems looks and feels like CLICK HERE to set up a free telephone consultation and screen share.
