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Elon Block

If you had to sell today, what is your business worth?

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Hi everyone,

I had a conversation with a client yesterday who just discovered he wasn't going to be able to

sell his business, at the number he hoped for.

A little background:
We have only been working with him for 4 months. The original plan was to help him increase
his sales and profits and improve his paycheck.

Basically, he wanted to put systems in place to accomplish the following things:

  • Increase the sales from $650,000 to a million dollars per year
  • Maximize the gross profit
  • Phase himself out of the day to day business operations

He is currently one of the two service advisors and was in the process of interviewing

his replacement.

His goal for selling the business was 2019.

To make a long story short, two weeks ago, he found out that due to an unexpected
family situation, he must sell immediately.

He was shocked to find out that his business is not worth what he hoped to get out of it,
mostly due to a number of factors discussed in these articles:
http://www.shopownermag.com/know-shops-sellability-score-part-1/
http://www.shopownermag.com/know-shops-sellability-score-part-2/

The number one factor that decreased the current value of his business is described below:

To be valuable to a buyer, your business must be able to succeed and grow without you at the hub of all ­activities, and your employees must be more than mere spokes that cannot operate independently of you. And the more your customers need you and ask for you personally, the harder it is for you to scale back your hours, take a vacation or eventually sell your business.

Your business is significantly more valuable if you are successful at building a “brand,” not simply a place where your own reputation and your personal handling of customers is what brings them back. It’s the difference between thinking of yourself as having a “job” that requires you to show up at work to make money, ­versus creating a “business” where the brand is more important than the ­personality of the founder.

The majority of buyers who contact me don’t want to be a slave to the business and work every hour that the business is open. In fact, many buyers already own a business and are ­looking to supplement their income by purchasing an additional business where they will provide part-time ­supervision and marketing and business acumen. These buyers will pay a premium for a business that can clearly demonstrate its ability to run ­profitably without the seller as the critical hub.


It's interesting to see Art's current listings and see how the performance numbers

relate to the listing price for the businesses:
https://art-blumenthal.com/

What are your thoughts on the sellability score Art talks about, in his articles?

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