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Creating Business Equity Value

Posted by Doug Davidoff

Apr 18, 2012 3:52:00 PM

It's the dream of many entrepreneurs. Coming up with that big idea, starting a business, growing it and ultimately selling for a sum of money that allows them to relax for the rest of their life.

Over the last 20 years, I've learned that there are, fundamentally, two types of business owners: those that have no desire to sell their business and are just looking to earn a nice (or substantial) income doing things they love to do; while others desire to sell their business, often viewing their business as the primary asset in their wealth creation efforts.

What I find interesting is that only about 10% of those owners that desire to sell in the future ever really stop to understand what really drives the equity value of a business. Unfortunately, the failure to consider this typically results in a business that fails to deliver either on its income or wealth creation potential.

In my experience, there is a major driver of equity value that is often overlooked, and yet it is the primary driver in the enhancing the long-term valuation of a business.

The ability to systematically, independently, predictably and consistently generate new customers, while protecting your margins is crucial to unlock the equity value of any business.

I will be writing more about this in the future here, but for now suffice it to say that if selling your business in the future, whether to an outsider, to your employees, or to your kids, it is critical that you develop a well articulated, consistent, predictable approach to the development of new customers. This ability will enable you to unlock the max value of your business, while also enhancing the profitability and income your enjoy in the meantime.

Topics: B2B Sales Strategy