What is a Fair Value for My Busines?

I want to lock in an agreement now; but, could I set the Price later?

Scene: Bob conversing with a business owner about starting a succession plan

Owner: “I’ve got a really awesome employee who wants to buy my business.  I want to get a plan in place so my buyer’s committed and I won’t risk losing my employee to someone else but I don’t want to set a price yet.  How can I make that work?”

Bob: “Why don’t you want to agree on a price?”

Owner: “Well, I’m not ready to leave for another 3-5 years and I think my business will be worth more in the future.”

Bob: “So, what I hear you telling me is that you want your awesome employee to work really hard, make you more money, increase the value of your business, and trust that several years from now, you’ll work out an agreement?”

Owner: “Uh, yeah, I guess that’s what I’m saying.”

Bob: “Would you do that?”

Owner: Silence

A discussion, a wish, hope, or even an intention is not a plan, and without a plan, everything is risked: Death, disability, loss of key employees, a decline in market value, or the loss of the aspiring successor.  In addition to the company’s current market value, there is lease income to consider if you own the property, and the retail dollars value your “awesome” employee is earning you could easily exceed $500,000 year, per key employee.

Consider the following real-world example of an auto repair shop:
Business value today: $400,000
Lease income for 20 years @ $60,000 year: $1,200,000
Potential dividends during a 10-year transition: $800,000
Ready buyer for the real estate once the business is paid: $800,000

Given those numbers, is deferring a definitive succession agreement, in the hope that the company’s value will increase by $100,000, $200,000, or even $400,000 worth taking the many risks that can imperil the continuity, value, and legacy of your business?  The company may actually decline in value, you or your key employee could die or become disabled, the buyer may lose interest or be hired away by someone willing to fulfill his ownership dreams now.

If you have an ownership driven employee, (or more), who shares your passion for ownership and self-determination, design a plan and get it done.  There are innumerable ways to accomplish your succession goal.  We know dozens.  And, there’s always a place to start! https://perpetualbusiness.co/