A former client of mine has just sold a business for over $5 million. When she purchased it in 2020, it was valued at $250k. Her short story contains an extremely valuable business lesson.
To start, I’d like you to ask yourself the following question. If I work hard and smart for the next 4 years, what’s the maximum I could sell my business for?
Here’s why that question is so valuable
My former client, Jill, called me on Monday. She had some good news. The sale of her business went through. She bought it for $250k in January 2020. And sold it for $5.8 million.
I was working with Jill when she bought the business. It was already in pretty good shape. It didn’t need any meaningful capital investment. What it needed was an owner who could see the financial potential of the business. As she told me at the time; ‘He just can’t see the money.’
- The previous owner saw the potential value of his business as $250k.
- Jill saw the potential value as $5 million.
- Interestingly, they were both proven to be right.
What happened over those 4 years to make all that money? The core difference was that the previous owner made decisions based on a $250k payday. Jill made decisions based on a $5 million payday.
Our beliefs
When we believe that our business has the potential to sell for a certain amount, we act accordingly. It looks like this.
- Jill believed that the business she bought was potentially worth $5 million, so she bought it.
- As owner, she made $5 million decisions… decisions consistent with her valuation.
- Her decisions led to $5 million actions, actions consistent with her decisions.
- And her actions saw her make $5 million.
The key here is that we need to be able to see the money. That’s the spark. We need to genuinely believe in the potential value of our business. Only then will our decisions and the actions we take, be consistent with achieving the potential.
How do we find out if we’re underestimating the value of our business?
A good place to start is to ask a trusted adviser. Someone you know, if at all possible. This could be your accountant or maybe your business banking manager. If they can’t help you directly, ask if they know someone they can recommend.
This is a situation where trust is essential. Without trust we struggle to believe. And belief is what opens our eyes.