How Much is My Business Worth?

If you are considering selling your small business, it will be important for you to evaluate your business in order to derive a reasonable asking price. Experts recommend that you assess the business from more than one angle in order to obtain an accurate picture of how much your business is worth.

Rules of Thumb Methodology

Begin by analyzing the history of your business to determine how much profit the business has been earning in excess of your own salary and benefits. Project future data based on your specific history, as well as general market trends to establish if the past is a fair representation of the future. This is typically known as “Rules of Thumb” methodology.

Market and Industry Trends

In examining trends, it is necessary to consider such items as supplier price changes, competition, and how the particular industry is performing. Also, take a look at prices paid recently for comparable companies in similar locations. Additionally, compare your company’s year-end gross profit and operating income to other industry competitors. If your company is closer to the top of the range in profitability, you can command a higher price for your business.

Owner Benefits

Then investigate the value of your business by using the Multiple Method; a pre-determined multiple (usually between 1 and 3) multiplied by the earnings of the business. The earnings or “Owner Benefits” amount can typically be used as an effective basis. This number is the total funds that you can foresee being available from the business based on past experience. The value is derived by adding the owner’s salary and benefits to the business’s profits; then adding back non-cash expenses.

The multiple that is used is mainly based on the industry. It is usually one time the value calculated if the business owner is the entire business, such as consulting or freelance services. Businesses with a solid customer base and more than 3 years in business most likely will be worth 3 times the basis.

ROI

Another calculation that should be looked at is the Return on Investment (ROI) that a buyer could expect to receive if they purchase your business. This is calculated simply as Gain from Investment minus Cost of Investment divided by Cost of Investment.

Assets

In addition, take into consideration the value of the business’ assets. This includes inventory and equipment.

Overall, it is important to keep accurate financial records. Buyers seeking financing to purchase your business will need to present information to back up the price being paid for the business.

Startup Storytelling – Create a Business Worth Talking About, and Tell Stories About Your Startup

This is one way to approach the whole of business startup, I think. In fact, it is one way of considering your value proposition. If your business is not worth talking about, then you should probably not start at all. But your business is worth talking about. Avoid second-hand stories, because yours must differentiate you.

They have to be good stories and have a purposeful message. In these days of information overload, a good story will always win over dry ‘corporate speak’ or ‘marketing hype’. If you are starting a business, your experience is a treasure trove of stories. Do not be shy. You have learned many lessons and can make them useful for others.

Entrepreneurs Stories to Attract Attention

Entrepreneurs need stories badly. If you contact someone and say, “I’m calling from the Googleplex and I..,”you will probably get attention. If you are making a presentation and you are introduced by the chair saying, “Will is from Goldman Sachs..,” your audience is likely to be very attentive.

But neither of these apply to you. And you need to attract attention fast, however good your (unknown) product or service.

Injecting some humor is good, unless like me you risk forgetting the punch line. The story need not be long and should follow the advice of Chip and Dan Heath (authors of Made to Stick) who say, “For an idea to stick, for it to be useful and lasting, it’s got to make the audience:

  • Pay attention
  • Understand and remember it
  • Agree/Believe
  • Care
  • Be able to act on it.”

Reveal Who You Are

Your story will reveal who you are implicitly, without having to churn out out your resume, or hand out your business plan. The story will of course be true and even if you are telling a story against yourself or one that demonstrates a lesson you have learned, make it positive in tone.

That does not mean that stories need to be embellished and there is nothing wrong with revealing your emotions. It could be that the lesson learned was a hard one. Your brand certainly needs its story and it should not be defensive. It should be narrative. “It’s about communicating who you, as a business, are-discovering your identity, not inventing a new one willy-nilly. Positioning helps a company become what it is, not something it’s not,” says Stephen Dunning, author of The Leader’s Guide to Storytelling.

Rehearse Your Story

Storytelling may sound easy. It is not, and you need to prepare yourself, just like you would for any presentation. Craig Wortmann, author of What’s Your Story? has an excellent piece of advice, “Approach your presentations as if your clients or people will not be allowed to take notes or refer to any documentation.”

Craig’s storytelling mnemonic, IGNITE, is worth you noting for creating your own stories-make them:

  • Intentional
  • Genuine
  • Natural
  • Improvisational
  • Total
  • Engaging.

Find a storytelling buddy and rehearse your story together. If you do not like that idea, record it and listen to it on your own. Better still record it on your webcam and play it back to review how it goes. If if you have no webcam, tell it to the bathroom mirror! A live story telling will be different because you will get feedback from the audience, but a rehearsal will iron out obvious shortcomings.

Where the Subject Sources Are

The sources of subjects for your storytelling are most effective if they come from your own experience. But they can also be:

  • second-hand; I told a story to a trainer friend and he loved it enough to ask if he could use it and he has already told it with more panache than my original, but then he is an excellent storyteller;
  • from your company experience; successes of employees, customer experiences, neat problem solutions, examples of creativity;
  • from articles that quote experience or stories recounted in books; you will find Patagonia founder, Yvon Chouinard’s book Let My People Go Surfing is full of them;
  • presentations of stories retold by you in your own context, if they make strong and memorable accounts that are pertinent.

A storytelling story

A former colleague of mine, George, whose storytelling is a big contributor to his business success, always made me smile when we were on gigs together. He carries a battered old leather briefcase with him. It is so old and worn that the handle is long gone. When he arrives at the front, he needs a large table by the lectern, on which he can spread out a whole bunch of notes and papers before he starts talking. He is a business school professor and this underlines his professorial status.

What the audience does not know is that, while he delivers his presentation as if he had never done so before and does occasionally refer to the papers on the table, it is a presentation he has made many times before, with the same old notes from the same old briefcase. But this ritual is one of many reasons why he makes the presentation a winner every time. He tells the stories like it is the first time they have been aired.

Is Building a Network Marketing Business Worth It?

If you are not sure whether starting and building your own network marketing business is worth it, let me ask you this. Do you know how much it costs to start a regular business or franchise and how much the expenses are every month for these people? Let alone all the paperwork that needs be filed for the state, the employee insurances and taxes, etc.

If you want to learn about the costs involved in starting a franchise, you have to consider the franchise fee which is normally around $20,000, plus legal fees, build-out costs, inventory, supplies and your working capital, or the day-by-day cash that you will need on hand to run your business. As far as starting your own business, I can tell you from watching my husband closely who started his own business a couple of years ago that the start-up prices are quite high as are the monthly expenses, the paperwork is at times overwhelming, and if he doesn’t work, he doesn’t get paid.

However, one good thing these three ways of doing business have in common is that you get a tax-break. The government rewards those who decide to start their own small business and gives them many tax-breaks, whether they work from home, or they work from some type of locale or business building. However, many businesses that are self-started or franchised are noted to fail within a few years because the expenses are so overwhelming and they don’t find it worth the effort. However, those who see the value of building a network marketing style of business succeed.

Let’s look at some of the positive things Network Marketing offers us which is the reason motivated entrepreneurs succeed in this type of business. First of all, when you build your home-based business network marketing style, the start-up cost is very low compared to the other two ways aforementioned. The cost is normally between 40 and 200 dollars. The monthly expenses are low as well and normally are just to maintain the websites and back-office the company we partner with offers us, which have a ton of tools and training for us. A serious builder will also get business cards made up and get some DVDs and brochures that the company offers for their success, since we all may not be experts at the company or products, “but everyone can be an absolute master at using tools”, as Robert Butwin states in his book Street Smart Networking. There is no paperwork to be filed with the state, the shipping and handling services are handled by the company we partner with, and normally there is no inventory that we need to keep in our home. In addition to this, we can build our business as we go about our daily lives – continuing the job we already have whether it be stay-at-home parent, secretary, doctor, nurse, personal trainer, banker, etc. No matter what your occupation is, or what degree you may have gotten in school, or what gender and race you are, you can build your own business without tremendous risk and without having to take out a big loan or cash in all your savings.

Now let’s look at some of the frustrations we need to face at network marketers. The market has gotten a bad rep over the years because of all the people that simply signed up to get rich quick but were not really motivated and therefore quit before they experienced any real success. In addition, many people think that just the people on the top get rich, but those who sign up later will never make as much. Let me ask you this: when was the last time you noticed that the owners of a regular company – the company you currently work with or have worked with in the past – are those that make the most money, whereas the employees, you included, are simply getting paid a small paycheck, without any tax breaks?

Other frustrations may include telling people about the business (especially friends and family), approaching strangers about the products or business opportunity, not seeing quick results, and not knowing exactly what to do to make your business grow. Let’s approach each of these frustrations individually since they are all valid. First of all, if you have your own business, no matter what type it is, you NEED to tell others about your business. If you have started your own business non-network-marketing-style, who would you tell first? Strangers or your family and friends? I’m sure the answer would be a resounding family and friends. Well, approach your NWM business in the same way; you don’t want your family and friends to find out LATER that you have a business, so you? No… you want their support right off hand. Let them know your store is simply online, not offline, like many other companies have (which also have retail stores in your area). Secondly, we have approaching strangers, so let me ask you this: Do you have thousands of family members and friends that you don’t need to tell anyone else about your business and the products you offer? You believe the products are excellent and that is why you offer them, right? So tell others about them. If you don’t tell others, if you don’t advertise with whatever method you want, you will not be getting any business. You can’t just expect people to come knocking at your door or calling you if you don’t tell them you offer something, can you? As far as not seeing quick results goes, let me assure you that those who start their own business traditional style do not usually get quick results either, and yet their expenses keep piling up. And as far as not knowing exactly what to do to make your business succeed, I encourage you to simply look at and follow the roadmap that people that are in a rank above you have followed and succeeded. These people, and even the company itself, have taken the time to put together a roadmap, so all we need to do is follow it; it’s as simple as that. When you start your own business traditional style, there truly is no real roadmap to follow; you simply have to get out there and tell people about your business and talk to other entrepreneurs who have successful businesses of their own to see what they have done.

So, to answer the question “Is building a network marketing worth all the frustrations”, I would say it is, but you need to answer that question for yourself after reading this article in which I have written the positive things to consider, as well as addressed the frustrations that most people face. What do you think? Would you invest your time and effort in building a network marketing business yourself? Why or why not?