- October 20, 2016
- Posted by: admin
- Category: Business plans, Exit Planning
Understanding what transferable value is and how it can benefit you may change the way you view your overall operations. The more you know about this important concept, the better off you are.
Learn about building transferable value, its benefits and other things business owners need to create in their operations.
What is Transferable Value?
Transferable value can be expressed in one single question: would your business continue to run successfully without you working constantly to keep it on the straight and narrow?
The transferable value of your business refers to its value without you, the value at which your business will sell. This is very different than its current value based on earnings. For example: your business could have a current value of $3 million based on its earnings, but if it is not dependent on you running it, it would sell for two or three times more. This number represents its transferable value.
Building Transferable Value
If it cannot have continuing success without you at the helm, it is not as valuable to potential buyers. Helping clients in building transferable value is the job of exit planning advisors and valuation consultants. This is how you gain financial independence and build a business with true value in the market.
How a Consultant Helps
Valuation consultants and planning advisors help build transferable value into a business in three ways.
1) The first is that they know what buyers look for when purchasing businesses, and can help you steer your business in that direction.
2) Secondly, by sharing these objective concerns, you can evaluate how your operations fit with what a potential buyer will want.
For example: What makes a business able to go on without you? The answers include such ideas as: a solid management team, systems that are in place for operations, a good base of customers, a good cash flow, etc.
3) Finally, they work to enhance and protect the value of your company across the board by refining and executing your exit plan.
Business Without You
Again, the key factor in this is moving your business towards a place, where it can run successfully without you at the rudder. This is the only way potential buyers will look to acquire your company.
Indeed, it’s the only way your company will function even if you’re just looking to pass it on to the next generation of your family. This means that even without the desire to sell, you still need to create transferable value. Transferable value is your business’ future, and a qualified consultant can be invaluable to building it into your operations.
If you need help or advice building transferable value into your business and operations, call Jamie Schwartz of Schwartz Strategy and Valuation. She will help you get started on taking your business to the next level today!