What is the value of your business?

If you left a job (or two or many more) to run a business, we do have something in common. I will spare you the details of the 13 jobs I moved before I decided to be self-employed. Trust me they were good jobs and paid well, but they were just not right for me.

 I am told that most people who make the switch become self-employed to be more productive, better manage their time and make more money. It could be very far from reality and I am still to meet a small business owner who does not have a perfectly good explanation for why it has not as yet happened.

 In the start of 2017, I started a journey that has led me to where I am today. It was a point of reckoning that I hope every self-employed person arrives at, when they are willing to look at their lives and be honest with themselves. More importantly ask themselves the all-important question…

 What is the value of my business?

 If you can answer this question honestly, without reservation, you should pat yourself on your back and don’t read any further… for the rest of us, the next question is, where do I start?

 As a Mortgage Broker, I saw a dilemma in addressing the question. While there is always a notion of value, trying to arrive at a business value can be a challenge. While providing an excellent service to my clients, was very desirable, had I to sell this business, how would that value transfer to the buyer, without my involvement in the business.

 Many businesses are built on acquiring clients who say ‘Yes’ to the services on offer. But I learned that such an activity was not a business but aligned more to a hobby.  Much of the marketing effort for a small business is focused on funnelling clients who say ‘Yes” hoping that the sale never needs to happen.

 What is interesting is that Business Development is where the value is generated. Acquiring a client, activating them, retaining and growing their business with you while encouraging them to refer like-minded clients is what generates the value in a business, for therein lies the profitability and sustainability of the business.

 The inspiration for the picture at the top of this article came from a chat with a mortgage broker from one of the leading franchise groups in Australia. He had over 22% of a leakage with no retention strategy and had to write over 80 million dollars in new lending to maintain his trail income each year. I reckoned if that was a ship, it would look much like this.

 As I continue to help mortgage brokers who are looking to sell their business and or transition to retirement, I keep asking the question… What is the value of your Business? What would a buyer be willing to pay for your business and Why?

 www.brilliantbrokers.com.au