Mark Osborne explains that buyers set a business's price based on their willingness to pay, not what the owner thinks it's worth. Customer concentration, short-term contracts, and declining industries are risks that tank valuations.
Although there are tons of tools and, as you say, even different sizes of those tools, one of the things that I find to be helpful for companies is just, you know, as you think about, you know, how valuable is a business, don't just think through it from the lens of the owner of that business today, the operator, but think through of, you know, price is set by willingness to pay. It's the market that really determines the value of something. So if you look at it through the lens of a buyer or a potential buyer, that gives you a really good you know, lens and filter to think through, well, how much is this business worth? And just as you said, that customer concentration, well, that's high risk. I'm willing to pay less for that. If it's all short-term contracts, well, that's higher risk. I'm willing to pay less for that. If it's in an industry that's on a decline, well, that's higher risk. I'm willing to pay less for that. It gives you a really good, you know, sort of rule of thumb as a way of starting to see
How Can You Maximize Your Business Value Before Selling? with Randy Katz Video
