Month: January 2017

What is the value of my business?

what is the value of my busnessWhen we think about “what is the value of my business” one of the most common mistakes we will see with entrepreneurs is in valuing their business when it comes to raising capital.

In our enterprise we have had the opportunity to analyse more than a few hundred businesses annually. There is some commonality to the errors that we see but largely it revolves around the perceived value of the business as compared to the real value of the business as seen from the eyes of the investor.

In one phone call I remember chatting with the principal of a tech company in the beacon streaming sector. He proudly walked me through his business plan and asked if I had any questions? As a matter of fact I did. I wondered where he derived his assessment of his company’s value? He had pegged it at $5MM. It was a very interesting number I recall suggesting, in fact it is a very round number!! What happened next is pretty typical – he defended his price with no facts or science at all. Simply that he knew his company was worth that. He perhaps would have been better served to ask someone “what is the value of my business” who had some qualifications.

My next line of questioning was in regard to what his company had achieved. The answer was that he had a good idea. He had not made any sales, but like every company he was about to. So in reality his company was worth nothing or at least almost nothing. He had a good idea and he had spent some other peoples money developing a good idea but he had not proven it in the market.

The biggest mistake we see is overvaluing your company very early in your genesis. It means that the shareholders you may be fortunate enough to bring to the table have no room to grow their investment without substantial leaps in development of the company. The problem is then compounded because the first shareholders in are usually the worst offenders because they want to see growth in their value and so they arbitrarily increase the value of the company’s stock. I get it, it is human nature, but it also spells the demise of the company’s ability to attract capital to be able to operate and reach strategic milestones that add real value.

Back to the conversation. I pressed the entrepreneur on where the valuation came from and finally he suggested a very well respected friend told him his company was worth that much. It was all I needed to hear. I indicated I was not interested on the basis that the valuation was so far off base. Of course the entrepreneur defended his position and argued he would find the money and we said our good bye’s.

Imagine my surprise the next day when I received a call from the same gentleman. He thanked me for my input on the previous day and suggested that he had thought about his valuation and decided his company was today worth $2.5MM. I explained again that $2.5MM was also a very round number and interestingly it was exactly half of yesterdays value. Did he have a reason why? Of course it was as much a farcical number as the previous day’s and showed a serious lack of business intellect on behalf of the owner.

 

So What Is The Value Of My Business?

Sadly this process repeats itself far too many times. The lesson might be to figure our what your business is truly worth today (with some consideration given to opportunity) not what it might be worth tomorrow – that is tomorrow’s value.

So if you are wondering “what is the value of my business”Consider talking to many people, including private lenders and people in the same industry to get a benchmark price. What we do know is the metric for value is and always has been the price at which a willing seller will sell to the willing buyer who will buy. It is pretty simple really.

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Kick business in to high gear | Having a blast with all wheels driving!!

Kick business in to high gear | Having a blast with all wheels driving!!

kick business in to high gearKick Business In To High Gear

I am sure many of you are familiar with the benefits of all wheel drive vehicles. In the winter months we take pride in the fact that we either have all wheel drive or four wheel drive options unless of course we are driving a two wheel drive vehicle.

But without a good set of tires, you might as well leave the all wheel drive at home. There is a misconception that all wheel drive system will keep you safe on the road and stop you from sliding around corners… not true. The good folks over at Big O Tire in Westbank who play a huge role in the rally success I have been able to accomplish will tell you that. In fact worn winter tires are proven to be better than brand new all weather or all season tires.

Given that winter seems to be lasting a little longer and going a little deeper than usual, you might want to give BigO a call and see if they have any inventory left.

Talking of all wheel driving and kicking business in to high gear, this year is going to be an extremely busy one for me behind the wheel of a car – including hopefully a flying car!

I start off with an expedition up to the arctic for a major truck manufacturer. The team will be one of the last to travel on the Ice Roads to Tuk prior to them being closed down in favour of a newly built road. I am looking forward to the adventure and just a little bit anxious about camping on arctic ice in potentially -50 with hungry polar bears!

Then I have to kick business in to high gear and compete in the Western Canada Rally Championship again which gives me a busy year with the support of businesses like Valley Mitsubishi, Big O Tire and Stroma Signs (More announcements to follow!).

As luck would have it I was also asked to be a driver on a Baja team so this year I get to experience the thrill of the Baja 1000 with a great group of drivers – a dream from several years ago and I am excited to be a part of a team to challenge the event. Between the drivers we want to kick business in to high gear and get a solid finish!

All in all, it looks like a busy and productive year, although fitting business in to the schedule is going to be a decent challenge.

On top of all the driving activities we really have decided to kick business in to high gear and this year we will be not only selling the flying car but launching one in Europe too! Time to get your order in 🙂

Remember to check out your tires for winter – we still have a few bad months ahead.

Watch out for some exciting posts from Andre as he embarks on a crazy world record while he flying around the globe on business!

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