How to Think Like Business Buyers

How to Think Like Business Buyers

The value (price, if we’re selling) of a business is what a willing buyer and seller agree it to be.  However, assuming both parties are informed and rational, the value of most small businesses is calculated by multiplying annual profit times a “multiple.” The multiple is a number that reflects buyer confidence and often falls between one and seven.  So, for example, a business with annual profit of $100,000 at a multiple of two would be worth $200,000.  

Do You Own a Job or a Business?

Do You Own a Job or a Business?

As a business owner, do you have to go to work?  If you do, you are trading time for money, and that’s the definition of a job.  Business owners should earn distribution checks, not paychecks.

A paycheck is compensation for time spent at work.

A distribution check is compensation for accepting the risk and responsibilities of ownership.

Distributions are a return on investment, which has nothing to do with going to work.

How to Change Reality

How to Change Reality

“Are you sitting down?”

It was our new regional salesman, Frank, talking to a customer on the phone.

“I’ve got pricing for you, and I just want to be sure you’re sitting down when I tell you.”

I was in Georgia to find out why Frank was struggling, and it was apparent. The quote was for a small commercial job, but Frank thought $10,000 was a lot of money.  It showed.

Why Should I Buy From You?

Why Should I Buy From You?

At the junction of Interstate 80 and Highway 281 in Nebraska, stands a convenience store with a large, well-lit sign. The sign reads “We Have the Best-Looking Cashiers.” Customers judge the offer you put before them, then compare it to your competitors’ offers. If there is no meaningful difference, customers base their buying decisions on price...

The Most Important Number in Business

The Most Important Number in Business

“What would it take to double your profit?” I was talking to Brent, a contractor.  We had rearranged his income statement, and his margins were visible for the first time.   

“What do you mean?” he asked.

“I mean, based on last year, how much more would you have to sell to double your net profit?”