Beyond Growth: How to Build a Business Worth More | Jeff Glick

Yeah, what is the realistic way to calculate the valuation of your business for an exit? You know, not a big corporate company, but kind of a privately held company.

And you're doing, is it, like you said, 10 times cash flow or it's 10 times? Well,

I'm just using that as an example.

Got it.

Well, there are, one way you could do it is you could, not sure how accurate it is all the time, go and chat to EBT or Gemini or Claude and say, how much is my business worth if I have a free cashflow of a million dollars and I'm in this industry? Because somebody is tracking all the sales of that industry over time and there's an average.

And that's the average company.

Some might get more, some might get less.

And depending upon the scale of the company and what their free cash flow is, they might want to hire a third party to do a third party valuation to do what we call sell side due diligence.

Let's figure out what's not up to par and let's get it there.

For a company your size, so you could get the highest valuation possible.

I like to say this is an investment.

It's not an expense.

Because you will get multiples of that all the time.

If you do it right and at the right time.

For the baby boomers listening that own your own business, I've got a question for you here that might relate because I've read that part of the problem with the amount of massive wealth transfer expected over the next decade 10, 15 years, as you described, is maybe less, is that there's going to be too many businesses going on, not enough buyers that are in the marketplace that have the money to buy the amount of boomers that own businesses that will be wanting to retire and wanting to sell or forced to sell based on maybe health or other issues.

When is the right time to get out? It sounds like it ought to be sooner rather than later before.

Well, what you want to do is start planning for it.

You can't, it's not going to happen overnight because depending on the scale of your business, the acquirer is going to do due diligence and they're going to say, okay, Give me the last four quarters of your financial statements.

And they're going to do an analysis.

They're going to see if your revenues are increasing, if the number of clients you have are increasing or staying the same.

They're going to see if your margins are consistent.

Are they up and down? Is your cash flow consistent? That's what they're going to see.

And they want to see that on a quarterly basis.

And if you can't supply them with that, there's going to be an issue that they might say, okay, we think you're a good business, but now we want to do an earn out.

And we want you to be in your business for the next three to five years.