You’re invited to join us Wednesday, November 15th from 12:00 – 12:45 PM ET for a special event, presented by Phil Harwood. Our friends at Team Engine are hosting a webinar, “Are You Ready to Exit Your Business (Or Thinking About It)?”
Every business owner knows deep down inside that they will indeed exit their business someday, whether they’re ready or not. And too many owners avoid facing this reality because doing something about it seems complicated and expensive.
This webinar will provide you with an easy-to-understand overview of the succession planning process, along with some easy next steps to take.
As a bonus, each attendee will receive a complimentary Personal Readiness to Exit assessment and follow up consultation to review your personalized report.
Registration is complimentary and the webinar will be recorded so you can view at your convenience if you’re unable to attend. Click here to register.
Now go forth.
Phil Harwood & Tabetha Varwig
Founders and Senior Advisors
Tamarisk Business Advisors LLC
THREE WITH ME by Phil Harwood
Each week, I set aside three 20-minute appointments without knowing who I’m meeting with. The first three people who come forward get the appointments. This is not complicated. All you need to do is reply to this email before three other people beat you to it. We’ll find a mutually- convenient time and decide on the format (Zoom or phone). Unfortunately, I can’t offer “THREE WITH ME” every week so be on the lookout for it.
What’s the purpose of the meeting? You tell me. After all, you called the meeting. I’ll give you my thoughts and answer questions to the best of my ability.
WHY A TAMARISK TREE?Each week, we (figuratively) come together under the canopy of a Tamarisk tree – a spreading desert tree. To read about the significance of the Tamarisk tree, please click here.
BONUS CONTENT by Value Builder System
Below is new content, provided each week by our friends at the Value Builder System.
3 Ways To Make Your Company More Valuable Than Your Industry Peers
Have you ever wondered what determines the value of your business? Perhaps you’ve heard an industry rule of thumb and assumed that your company will be worth about the same as a similar size company in your industry. However, when we look at the data provided by The Value Builder System™, we’ve found there are eight factors that drive the value of your business, and they are all potentially more important than the industry you’re in.
Not convinced? Let’s look at Jill Nelson, who recently sold a majority interest in her $11 million telephone answering service, Ruby Receptionists, for $38.8 million.
That’s a lot of money for answering the phone on behalf of independent lawyers, contractors, and plumbers across America.
To give you a sense of how high that valuation is, let’s look at some comparison data. When we isolate the administrative support industry that Ruby Receptionists operates in, the average multiple offered for these companies over the last five years is just 1.8 times pre-tax profit. Jill, by contrast, sold the majority interest in Ruby Receptionists for more than 3 times revenue.
There were three factors that made Nelson’s business much more valuable than her industry peers, and they are the same things you can focus on to drive up the value of your company:
- Cultivate Your Point Of Differentiation
- Recurring Revenue
- Customer Diversification
Acquirers do not buy what they could easily build themselves. If your main competitive advantage is price, an acquirer will rightly conclude they can simply set up shop as a competitor and win most of your price sensitive customers away by offering a temporary discount. In the case of Ruby Receptionists, Jill invested heavily in technology that ensured that no matter when a client received a phone call, her technology would route that call to an available receptionist. Jill’s competitors were mostly low-tech mom and pop businesses who often missed calls when there was a sudden surge of callers. Jill’s technology could handle client surges because of the unique routing technology she had built that transferred calls efficiently across her network of receptionists. Jill’s acquirer, a private equity company called Updata Partners, saw the potential of applying Jill’s call-routing technology to other businesses they owned and were considering investing in.
Acquirers want to know how your business will perform after they buy it. Nothing gives them more confidence that your business will continue to thrive post sale than recurring revenue from subscriptions or service contracts. In Jill’s case, Ruby Receptionists billed its customers through recurring contracts— perfect for making a buyer confident that her company has staying power.
In addition to having customers pay on recurring contracts, the most valuable businesses have lots of little customers rather than one or two biggies. Most acquirers will balk if any one of your customers represents more than 15% of your revenue.
At the time of the acquisition, Ruby Receptionists had 6,000 customers paying an average of just a few hundred dollars per month. Jill could lose a client or two each month without skipping a beat, which is ideal for reassuring a hesitant buyer that your company’s revenue stream is bulletproof.
Jill Nelson built a valuable company in a relatively unexciting, low-tech industry, proving that how you run your business is more important than the industry you’re in.