The value of potential (blue sky) when selling your business.
One day two men were talking. The younger man Tom mentioned that he had just gotten married and thought it might be time to buy a house. The older man John asked him what kind of house he was looking for. Tom answered “three bedrooms, two bathrooms, a two car garage and a pool would be nice”. Immediately John clapped his hands together and with a broad smile said “I have the perfect thing for you – come follow me”
So the two men got in their cars and the younger man followed John until they turned down an unpaved road. There the older man jumped out of his car and with a flourish pointed to an overgrown empty lot and shouted. “There it is!” Puzzled the younger man said “but there is no house”. John answered “true – but it’s got POTENTIAL!”
I am reminded of this story when I speak to business owners who bring up the “potential” of their business. They will tell me that if a new owner just did this or that they could make so much more money. But the moral of this story is that if you want to be paid for it you must build it.
Just as Tom is not going to pay John for a house he has not yet built, a buyer is not going to pay a business owner for potential not yet realized. Business are valued for what they have done in the past. The potential belongs to the buyer. If you are considering selling your business in the future lets talk.
There may be time for you to build on that potential, so you do indeed get paid for it.
Anthony John Rigney is the Broker / Owner of Quorum Business Advisors, LLC and a Board Certified Intermediary. If you would like to know more about his services contact us