How to Value Your Business and Increase It's Potential by Jay B. Abrams

Author:Jay B. Abrams
Language: eng
Format: epub
Publisher: McGraw-Hill
Published: 2005-08-14T16:00:00+00:00

The “Big Banana”

However, the foregoing is still not the largest component of risk in privately held businesses. As I have stated in several places earlier in this book, and as Linda Feinholz states in the downloadable Web site chapter, the largest single risk to most privately held businesses is overdependence on the business owner.

If you want to make your business valuable, you need to wean your employees away from dependence on you. How? By hiring and training excellent employees, creating a logical system of organization with good structure and procedures, being computerized (with an impeccable backup system) and very professional—just like big business, but hopefully without the cumbersome bureaucracy.

Many people think of their business as “their baby.” A child is a good metaphor for a business. Babies need near constant attention or they won’t survive. As children grow, a responsible parent will make sure to give them life skills and responsibilities, so they learn to be independent. Eventually, they will need to live their own lives. A parent who does everything for an older child is crippling the child. The same is true of a business. Your young business may be “your baby,” but if you want to sell your business for a lot of money someday, make sure it becomes “your big boy or girl”—wean it off of dependence on you.

The more “turnkey” you can make your business, the more you can enjoy life, and the more you receive when you sell it. I remember valuing a business in 1987 that was so turnkey, the president was preparing to leave for a one-year fishing trip on his own ship. He was leaving his various generals, captains, and lieutenants in charge and going off for the time of his life—and he had the chutzpah not to invite me to join him! While you may or may not like fish, that degree of independence from the owner is the model for any private business to become valuable.

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