So in today’s video, I want to talk about what your business is actually worth and how you value it. So my business coach, he got some figures from his head office. Don’t quote me exactly on them, but it went like this. If you have a business that is mainly run by yourself and it’s heavily dependent on you, even though you might have a handful of staff, then the business tends to be worth 2.2 times its net profit. And if you have the kind of business where it’s not reliant on you at all, and it’s all process-driven, you’ve got staff that know what they’re doing, you might even have a manager in place, it tends to be worth 6.7 times its net profit.
So in the first scenario, let’s say your net profit is 10,000 a year. Your business should be sold for about 22,000. In the second scenario, where your net profit’s 10,000 a year, it means your business is actually worth 67,000. So what that’s telling you is, essentially, there’s a big difference in terms of a business that’s run by the owner and a business that’s automated and process-driven that’s run by itself.
So in the second scenario, what you’ve got to remember it is a business that’s process-driven is really scalable, so the net profit figure’s likely to be more than 10,000 anyway. It’s likely to be much higher. So not only is the owner in the second scenario getting more money as a multiple, they’re doing it on a higher base. So in one case, it might only be sold for 22,000, and in the latter case, it could actually be worth millions, just because of the actual net profit.
And that multiple, of course, it can go well over 6.7 times the net profit, because if you’re selling on a really strategic basis and you’ve found the exact right person who wants your kind of business, they could be willing to pay a lot more for it for strategic reasons, not just as an investment. So there’s other things involved in actually selling the business as well, but what I’m going to do is I’m going to do a part two of this video and talk about those other things. So just as a summary, automating your business and getting it to run itself will add a load of value to what its selling price actually is. And then in the next video, I’m going to talk about what other kinds of things buyers look for when they’re looking to buy a business.
So what I’d like to do is if you are interested in building a business that you’d like to sell down the line, then watch the next video, but also get in touch with us. There’ll be a link at the end of this video. And book in a free game-plan session, because what we’ll do with you is we’ll talk you through the next steps involved in building that kind of business. And even if you don’t want to sell your business, then building the kind of business that runs itself will still have a massively-beneficial impact on your lifestyle. So get in touch after this video and book in your free game-plan session.