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The Rockstar Company Valuation: What to Understand Before Selling Your Business

Aug 8, 2015 by Matthew Garrett 0 Comments
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If you’re considering selling or transitioning out of your company, you’ve certainly worried about the future of your organization.

One of the most stressful parts of selling your company is the valuation – the process that puts a dollar-value on all of your hard work. Here are the three levels of valuation you should understand before selling your business:

  1. The reduced valuation: Most businesses that get a reduced valuation are disorganized or progressively declining. These are some contributing factors:
    • Poor accounting
    • Poor record keeping
    • Potential liability, typically referring to a history of unethical decisions evident in financial statements, lawsuits or other business dealings
    • Declining revenues
    • Declining gross margins
  2. The enhanced valuation: This will show that your business is better than your competitors. Here are some examples that give businesses an edge:
    • Gross margins higher than the industry average
    • Inventory turns higher than the industry average
    • Profit higher than the industry average
    • Conservative balance sheet management
  3. The “Rockstar” valuation (the one you want!): To get to this level, your business must have a unique market position and a unique ability to create opportunities for shareholders and customers. Examples include:
    • Growing revenues and profits of at least 15 percent per year for three consecutive years
    • Use of technology to create a barrier to entry with your products, services, service delivery, sales processes, manufacturing processes, etc.
    • Fulfillment of a strategic business niche in the industry that is difficult or impossible to replicate

The valuation process can be a stressful and confusing endeavor, and to properly value your business, make sure to have a team of experts to walk you through the process.

Learn more about getting a “Rockstar” valuation by joining Matthew Garrett at The 23rd Annual Gathering of Games, taking place September 9-11, 2015 in St. Louis, Missouri.

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Our approach to running a company was developed to help close one of the biggest gaps in business: the gap between managers and employees. We call our open-book approach The Great Game of Business. What lies at the heart of The Game is a very simple proposition: The best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run and a stake in the outcome. Let us teach you how to develop a culture of ownership, where employees think, act and feel like owners.