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

Aug 8, 2015 by Matthew Garrett 0 Comments


the rockstar company valuation what to understand before selling your business blog

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:

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  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.