When building a business, the goal is to scale and grow and ultimately sell your business. Thus an accurate business valuation is essential.
In some cases, businesses are sold outright with everything they are built on, but in other cases, businesses are stripped and torn down simply because the buyer is only interested in one part of the business that he sees as valuable, which is not a desirable outcome for the owner because he does not receive the actual value of his business.
Listen to this podcast from The Money Show where Pavlo Phitidis discusses valuation and successfully selling your business.
A business that Aurik is currently working with was about to be acquired. However, in the acquisition, the offer they received for the company was way under what their assets were worth and their understanding of the value of the business.
There are 2 key takeaway points which could be seen as red flags in this business:
For a successful business sale or exit, start at the end and imagine yourself as the buyer; this may help you with business valuation. Grasp the mechanics of business valuation and simply construct a business to demonstrate those mechanics. A few key elements to consider are:
Build a coherent business where the sum of its parts far greater than the whole.