In an analysis of more than 14,000 businesses, a new study finds the most valuable companies take a contrarian approach to the boss doing the selling.
Who does the selling in your business? My guess is that when you’re personally involved in doing the selling, your business is a whole lot more profitable than the months when you leave the selling to others.
That makes sense because you’re likely the most passionate advocate for your business. You have the most industry knowledge and the widest network of industry connections.
If your goal is to maximize your company’s profit at all costs, you may have come to the conclusion that you should spend most of your time out of the office selling, and leave the dirty work of operating your businesses to your underlings.
However, if your goal is to build a valuable company—one you can sell down the road—you can’t be your company’s number one salesperson. In fact, the less you know your customers personally, the more valuable your business.
DID YOU KNOW?
The Quality Of Your Lifestyle & Value Of Your Company Have One Major Thing In Common.
They Are Both Dramatically (Negatively) Affected By Your Business’ Dependence On You.
When your own company requires your direct involvement and your name fills multiple circles in your organizational chart, you know firsthand what that leads to — burnout and stress.
Furthermore, no one else would want to buy such a business, regardless of how much profit it generates, because acquirers want to buy a business system, not a job.
Fortunately, there is a proven methodology for systematically increasing the value and “sellability” (a huge benefit even if you have no plans to sell) of your company, thereby increasing the quality of your lifestyle and level of personal freedom you experience every day, by transforming your company into a self-managing income-producing asset that can thrive without you.
It’s call The Value Builder System.
The first step toward this freedom is to get your Value Builder Score to see where you currently stand.
Companies that score 80+ typically have valuations 71% higher than the average scoring (59/100) business.
Complete the 18-minute questionnaire and instantly get your score out of 100 possible points.
The Proof: A Study of 14,000 Businesses
We’ve just finished analyzed our pool of Value Builder Score users for the quarter ending December 31. We offer The Sellability Score questionnaire as the first of twelve steps in The Value Builder System, a statistically proven methodology for increasing the value of a business.
We asked 14,000 business owners if they had received an offer to buy their business in the last 12 months, and if so, what multiple of their pre-tax profit the offer represented. We then compared the offer made to the following question:
Which of the following best describes your personal relationship with your company’s customers
- I know each of my customers by first name and they expect that I personally get involved when they buy from my company.
- I know most of my customers by first name and they usually want to deal with me rather than one of my employees.
- I know some of my customers by first name and a few of them prefer to deal with me rather than one of my employees.
- I don’t know my customers personally and rarely get involved in serving an individual customer.
2.93 vs. 4.49 Times
The average offer received among all of the businesses we analyzed was 3.7 times pre-tax profit. However, when we isolated just those businesses where the owner does not know his/her customers personally and rarely gets involved in serving an individual customer, the offer multiple went up to 4.49.
Companies where the founder knows each of his/her customers by first name get discounted, earning offers of just 2.93 times pre-tax profit.
When Value Is the Enemy of Profit
Who you get to do the selling in your company is just one of many examples where the actions you take to build a valuable company are different than what you do to maximize your profit. If all you wanted was a fat bottom line, you likely wouldn’t invest in upgrading your website or spend much time thinking about the squishy business of company culture.
How much money you make each year is important, but how you earn that profit will have a greater impact on the value of your company in the long run.