My Impressions: What's Your Business Worth?

So apparently mass e-mail marketing does work.  I ended up subscribing to Entrepreneur magazine…  They e-mailed me a discount deal: $5 for a whole year.  I believe material and labor costs more than that.  Yet, I opted for the $8 dollar electronic version (which has no variable costs).  I would’ve preferred just a PDF file instead of having to download their app and all that bullshit.  But I guess it is their way to combat piracy. 

Anyway, one of two “freebies” of subscribing to Entrepreneur is this book.  More ads!  The purpose of this book is to try to convert business owners into customers and subscribe their service at bizequity.com – a valuation tool for entrepreneurs.  There were lots of “case studies” on how their online valuation tool was amazing and helped create value to business owners.   If anybody ever uses this tool, please let me know if you found it helpful.  Sharing is caring.  All the marketing in the book seems to suggest value for small businesses with detailed records.  I highly doubt small businesses have that level of detail in record keeping…  Honestly, even large companies have shit data.  As for the rest of the book, meh, still had some value in it. 

Cover to cover (electronic) was 135 pages, I went through it in about an hour.  But I’ll save you all the advertising for the tool and you can soak up an “entire book” of knowledge in 2 minutes. 

Basically, everybody should know the value of their business, but more often than not people don’t.  There are lots of potential scenarios that could be better dealt with knowing what the business is worth:

   • Kicking people off / bringing people on the team

   • Divorcing your spouse who is also a business partner

   • Estate and inheritance planning

   • Selling / exiting

   • Negotiations

   • Getting loans and investments

The more well-informed you are, the less likely you’ll be taken advantage of. 

Unfortunately, “Wall-Street” valuations that are used on large companies may not be relevant for small businesses.  There are a lot of tax-incentives for a small business owner that may not be reflected through a discounted-cash-flow model or 6x EBIT.  Running your own business also aligns enterprise value and managerial incentive 100%.  Your enterprise IS your well-being.   There are no conflicts of interests or principal-agent problems. 

Similarly, when a small business owner asks for a loan at a bank, the bank asks:

   • How much do you make?

   • Pull credit profile

These two factors generally do not accurately reflect a new startup that has a lot of upfront investment with very little sales.  So then yada yada yada the book tells you to buy their service and they will perform magic and give you a number. 

Writing a book has become a new business model.  Blogger James Altucher explains the benefits of this writing a book business model:

   • Much more memorable handing out your book at networking events than just a business card

   • Instantly establishes you as an expert

   • You have hot leads and warm eye balls going through your [free] book that’s promoting your [not free] product

   • Quenches your thirst for attention

I guess this is one of those books.