Following on an earlier discussion of owner-dependent firms, this week we examine a quickly...
Double the value of your business
One of the most significant factors buyers consider when purchasing consulting firms is called owner dependence, because many consulting firms are typically smaller operations that capitalize on the network and reputation of the firm’s owners.
If you’re the buyer of the business, and the owner is inextricably tied to the brand of the business, of what value would that company be to you? The main person around whom the business is built is leaving. Read that again.
The brand, the client relationships, and the talent relationships are all wrapped up in the one person who won’t be there when the sale goes through.
The value of these businesses tend to be very low as a result, often with an EBITDA multiple less than two, since the new owners are unlikely to benefit from those relationships.
It should be no surprise then that removing owner dependence (by separating the owner from the person running the business) can double the value of the business. To do this, the owners must put someone else in charge of running the business.
Sound simple? Sure. But is it easy?
I talk to a lot of business owners who are preparing to exit, and I ask them to confront their owner dependence head-on. A majority, by the time they’re ready to retire, simply don’t want to take this on. For some, it’s because letting go of a lifetime of being in the center of the business is too difficult to confront. For others, it’s that it seems like it’s more work than it’s worth. For still others, they’ve convinced themselves that no one in their firm could take it over (while often true, this is a complex topic for another blog post).
If this sounds like you, we need to talk. I can meet you wherever you’re at with your business:
- If you want to double the value of your business before you sell, I can help you get through the challenges, and you get the increased value
- If you want to leave the business, but you want it to survive and continue to employ your people, I can help with that as well.
If this sounds like you (or like your spouse), reach out to me today and let’s talk. Together, we can help your business become a legacy that is around for a long, long time.