AFFILIATE MARKETING
3 Non-Financial Factors That Could Impact Your Business’ Value
Opinions expressed by Entrepreneur contributors are their own.
Determining a business’ value is not all about adding up revenue and subtracting expenses. While an important piece, these hard numbers are only half the equation for computing what a company is worth. To come up with the true value, we also look at factors like the level of owner involvement, company goals and growth opportunities. When we use the complete equation, we get a comprehensive picture of a business and can better understand the story of its past, present and future.
Calculations may vary depending on the company, but in a healthy one, there is about a 50/50 split between the quantitative (financial) and qualitative (non-financial) sides of performance. If the business isn’t profitable, it’s more important to focus on the quantitative side and fix the numbers first. Many owners don’t want to hear that, but if they’re not hitting their numbers, it may mean the business is not working. They must fix the quantitative issues before moving to the qualitative side.
Related: What Is a Balance Sheet and Why Does Your Business Need One?
For healthy companies that want to maximize their value, the qualitative indicators can be bundled into three main categories.
Evaluating quality
1. The owner’s goals
We’ve found significant research showing that if an owner has defined goals and plans for the future that are in line with market expectations for their company’s value, they’re going to have a much stronger exit. What is the owner’s defined goal for exiting the business — to get the most money, to take care of their employees and to ensure a legacy? You must then get to the “why” behind the goals and devise a plan of action. It almost doesn’t matter what the answers to the questions are; having achievable goals and a strategy for reaching them can increase the company’s value because it keeps the owner focused on improving the other areas of the business.
2. The owner’s role
The extent of the owner’s involvement is a critical indicator, but perhaps not for the reason you think. The more involved the owner is in day-to-day operations, the more central they are to the business, the less the business will be worth down the road. If the owner is the linchpin that holds everything together, what will happen to the company when they leave? Evaluating operations is more about the system and the structure of the team. Look at the organizational chart and who’s on it – are they good employees or bad employees? Examine the company’s processes and procedures and how new team members are trained and onboarded. The owner sets the vision, but it’s the team that increases company value by carrying out the vision.
3. Growth opportunities
Nobody wants to buy a business and keep it exactly as it is. They want to see potential for growth in the future, especially the potential for return on their investment as a buyer. Whether it’s a simple price increase or new locations, whoever buys the business is going to ask about growth opportunities. Indicators like product or service diversification in both the company and the industry it’s in give a good sense of whether the company is moving forward or standing still (and at risk of going backward). The more potential you can show, the more upside there will be for the next owner — adding up to greater value.
Related: 8 Factors That Determine the Financial Health of a Business
Cycle of success
When the qualitative side of the equation is working, it all ties together. The owner knows the goals, which are aligned with where the company is going, and is leading the organization but working themselves out of the day-to-day operations; the business grows and creates more growth opportunities for the next owner. Paired with profitable numbers, it’s a cycle that builds a high-quality business.
For the best owners, it takes a minimum of three to five years to get that cycle working for you and have reliable indicators of your value. Making it part of a 10-year strategy is even better.
At Exit Factor, we have 62 different qualitative indicators that we use for determining company worth. We don’t use them all, or even close to that, for every business; it’s usually a matter of tweaking three to five of the 62 indicators. Figure out which of those 62 are essential for your company, and you’ll have a truly forward-looking strategy for profitable growth.
AFFILIATE MARKETING
Kevin O’Leary: I Got an MBA Instead of Following My Passion
Kevin O’Leary once had a photography lab in his basement.
As a teenager, he did all he could to follow his dreams of becoming a photographer. There was one issue — his father didn’t approve.
“He said you’re not good enough and you’ll starve to death,” O’Leary said in a video posted to X. “He said you should go to college and get a degree and I went on to do an MBA which ended up being a very important tool for me later.”
O’Leary has previously explained why he thinks an MBA, which can cost $231,420 on average for a top 10 program in the U.S., was worth it.
In a 2021 Facebook post, he wrote that the degree gave him “a head start” and taught him “discipline,” turning him from a 20-something with poor study habits to someone who knew how to make money, defend his ideas, and focus on his strengths.
O’Leary graduated from the University of Western Ontario in 1980, which now costs $83,250 per year for domestic students.
Photography still played a key role in his life: After graduating, the first company he started, Special Event Television, was a production company focused on sports entertainment.
Related: Kevin O’Leary Is Launching a New Agency With the Founder of Shazam
“It was my attempt to get back to the thing I loved, which was photography and production, and make money doing it,” O’Leary said in the X video. “There was that science and that art coming together in my life.”
When I first wanted to be a photographer, My dad told me I wasn’t good enough—I’d starve. So, I got an MBA and ended up building and selling a company for $4.2 billion. It all came together—business, creativity, and the drive to win. I wouldn’t change a thing. pic.twitter.com/Xv8ttJFk2V
— Kevin O’Leary aka Mr. Wonderful (@kevinolearytv) September 17, 2024
O’Leary sold the company and then used the proceeds to start SoftKey, which sold education and entertainment software, in 1986. He and his two business partners sold SoftKey to Mattel in 1999 for $4.2 billion.
Looking back, he has no regrets.
“All of that stuff made me what I am today, the good, the bad, and the ugly,” O’Leary said in the video. “And I wouldn’t change a thing.”
Related: Kevin O’Leary Says ‘Right to Disconnect’ Laws Are ‘Crazy’
AFFILIATE MARKETING
Bernie Madoff’s Niece on Her Mission to Fight Pay Inequities
In this episode of Reclaim + Advance, we’ll hear from Jess Ekstrom. Jess is the founder of Headbands of Hope and Mic Drop Workshop. She also invests in women-owned businesses, is a two-time bestselling author, a top-rated speaker, and a new mom. Jess and her companies have been featured on Today, Good Morning America, 17 magazine, Vanity Fair, Forbes, People, and more importantly, they’ve helped millions of women and girls around the world.
For years Jess Ekstrom avoided speaking about a formative event in her family life — her family getting swindled out of money by her uncle, Bernie Madoff. But on the show, she explains what spurred her to start speaking about formative challenges, and how true optimism isn’t naive.
In this episode, you’ll hear:
- How Jess turned a family scandal into fuel for her entrepreneurial journey.
- The shocking pay gap revelation that inspired Jess to champion women speakers.
- Why simplifying complex ideas is key to connecting with your audience.
- How embracing vulnerability can amplify your impact as a speaker and leader.
I’ll share a few of my favorite quotes from my conversation with Jess below:
On Authentic Expertise:
“A lot of [the] time, the thing that you teach to others is the thing that didn’t come naturally to you. It’s the thing that you had to will yourself to learn and to practice.”
The Power of Simplicity:
“I like to simplify the complex for people. We make things too complicated, whether that be entrepreneurship or speaking or writing. I like to make things feel attainable to someone.”
Embracing Struggle in Storytelling:
“No one wants to learn from someone who’s just naturally good at something. Sometimes the greatest lessons that you have to share with others come from your worst moments.”
Click here to listen on your platform of choice, or tune in below.
AFFILIATE MARKETING
How to Teach Kids About Money and Set Them Up for Success
Although 83% of U.S. adults said parents are the most responsible for teaching their children about money, 31% of American parents never speak to their kids about the topic, according to a survey from CNBC and Acorns.
Last week, the subject came up on Northwestern Mutual’s A Better Way to Money podcast, which featured social media star and owner of Stur Drinks Kat Stickler and Northwestern Mutual vice president and chief portfolio manager Matt Stucky.
“I love and respect my parents, but we didn’t really talk about money ever — I never saw them talk about money,” Stickler told Stucky during the conversation. “It was taboo. It wasn’t brought up once.”
According to Stucky, parents can instill strong money management skills like any other good habit.
“It just takes a lot of repetition — things like saving, investing,” Stucky said. “I’m not going to teach my 4-year-old about investing, but just the idea of if I save a dollar, that means I can spend it down the road on something that I really want. That takes a while to sink in.”
Money might not have been a regular topic of discussion while Stickler was growing up, but the entrepreneur says her mother did show her the value of a dollar in other ways: repurposing old jeans into shorts or empty butter tubs into containers for school lunch.
In addition to talking to their kids about money, parents can lead by example when it comes to smart financial decisions.
“There are new risks that are now in the equation of being a parent,” Stucky said. “Things like, What if something happens to me; what if I can’t work anymore? How does that impact my child’s financial life?“
Navigating those uncertainties means planning for big-ticket items, according to Stucky. Stickler, who has a young daughter, said she’s already taken some key steps to secure her future: setting up a will complete with a month-by-month timeline and establishing funds for healthcare and school — and even one for clothes and toys.
Related: What Your Parents Never Taught You About Money
According to Stucky, parents should leverage today’s circumstances for tomorrow’s success.
Stucky recommends setting up a 529, to which you can contribute funds for education, and a Roth IRA for your child.
“[With a Roth IRA], you are able to contribute on their behalf up to the child’s earned income amount or the current contribution limits of $7,000, and the dollars come out tax-free after age 59 ½ or if they need to use it for a qualifying life event,” Stucky explains. “It’s a way to set up your children for their retirement, as well as support generational wealth.”
Parents might also consider a Uniform Transfer to Minors Account (UTMA), which has no limit on the amount that goes in and allows them to retain control until their kids reach 18-21, depending on where they live, Stucky says.
Finally, Stucky recommends the “often overlooked option” of permanent life insurance for your child.
“The policy will pay a death benefit someday so long as the required premiums are paid,” he explains. “In addition, policies accumulate cash value, which your child could access during their lifetime.”
-
WORDPRESS7 days ago
7 Best Small Business Website Builders (Tested & Compared)
-
SEARCHENGINES6 days ago
Daily Search Forum Recap: September 20, 2024
-
SEARCHENGINES5 days ago
Google Ranking Volatility Spikes, Search Console Bug, Search App Stalled, Google Ads News & Business Profile Suspensions
-
WORDPRESS6 days ago
Bluehost Review 2024: Honest Look at Web Hosting Giant
-
WORDPRESS6 days ago
How to Redesign a WordPress Website (Beginner’s Guide)
-
SEO7 days ago
Boost Your Local SEO with the Google Local Guide Program
-
WORDPRESS4 days ago
How To Build An Ecommerce Store With WordPress And CloudWays Using AI
-
WORDPRESS5 days ago
Top 6 WordPress Plugins to Supercharge Your E-Commerce Store