How Much Is A Business Worth?

Earnings and value are related

Once in a while, a business is worth what it sell for. Most of the time it is worth what it will earn. Usually it will sell based on what it will earn.

Increase earnings and increase value

It would therefore make sense to understand how to make it earn more and earn in ways that are more attractive.

Think about earn the same with less capital employed, with lower variable costs, and more predictably.

Efficiency matters

Some changes make a business more efficient. Doing things right. Cost reduction by trading capital cost for variable costs. Research into methods is often productive. Pay attention to what competitors are doing.

Effectiveness matters too 

Doing right things is crucial. Most young businesses are close to the edge. Effectiveness is the key to focus.

Look for your best best before expanding product lines. Ask customers for input on their wants, needs a preferences. Price looks more important than it really is. Customers want best value not lowest price.

Spend time on marketing. The essence of marketing us to create a customer. Selling comes later.

Many companies have learned to subcontract effectively. Like Apple. They control design, marketing, and finance. Others build chips and assemble. Apple applies their resources where they have the most value. It is a strategic decision.

Strategy and Tactics

Understand the difference between tactics and strategy. Tactics are always how questions. Strategy is always what and when and who and where and why.

Leaders do strategy and delegate tactics. Not because they couldn’t do them well, even better, but because they are good at things others can’t do at all. Find your strengths and lead others to do what you design.

Life is like that too. Do your best to be effective and trust others to do theirs. Life is worth what you make it.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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