You Don't Have to Like Your First Valuation. You Just Have to Get One.

The first time I seriously thought about selling my first business was about five years before I actually did. I had a number in my head that I thought the business could sell for, so I talked to a business broker to see what I should do next. The first thing he did was give me a business valuation.

I didn't like the number he gave me, and I really didn't like that he came with other business listings to back up the number he told me. I didn't have any data to back up the number in my head, but it was still a tough pill to swallow.

That's when it clicked: If I wanted to sell for an amount I was ok with, I couldn't keep running the same business. I'd have to fundamentally change the business, but I didn't have a clue of where to start.

As humbling and confusing as that valuation was, I realized I was fortunate to have had that conversation. Most business owners are too busy running the business to think about the realities of selling their business. Thinking about exiting is something they'll do “tomorrow,” but tomorrow always seems to have another fire to put out.

I think business owners should reframe their thoughts on a business valuation:

How my first business valuation changed the business

That first valuation forced me to look hard at what was driving value in my business and what wasn't, and I started to have some ideas. One of them was cleaning short-term rentals. My husband and I had been early adopters of Airbnb, so we were familiar with the concept, and my business had started to take on some short term rental clients, but the logistics were creating some challenges.

I was testing that idea when I had a great coach through EO Accelerator. He listened to the struggles we were having scheduling same day Airbnb cleanings around our existing weekly clients.

He saw what I was trying and told me to flip my thinking and prioritize the Airbnb cleanings instead. He said I had a real opportunity in front of me, if I could figure out the logistics of cleaning more Airbnbs. He even suggested letting go of some of our long term clients, if necessary.

How my first business valuation changed the business

We restructured our team and started promoting vacation rental cleanings, and built an enviable portfolio. When I did decide to sell, I was able to show that most of the homes we serviced needed to be cleaned 2-3 times a week, and most of our clients had been with us for over 2 years and were still ADDING properties to the list we were servicing for them. And my team was running the logistics and day-to-day.

I was able to show buyers that we had consistent, steady business that could transfer to new owners with little to no disruption, and didn't require the owner to be directly involved.

The business was pretty darn attractive, so I could be strategic about my timing of sale. I knew Airbnb was still gaining popularity. We had ridden the wave up, but I knew we weren't at the peak for what this market could bring, so I was also able to show the POTENTIAL for the business.

What I'd tell you if you haven't thought about exit or a business valuation yet

• Get a business valuation now. Don't wait until you're ready to sell because you might not get the news you want. It took me five years to turn my business into one worth selling. If I'd waited until I wanted out, I wouldn't have had the time.
• Be willing to change the business. The business I sold was not the business I started. The valuation is what showed me it needed to change.
• Watch the wave. A trend can grow your business fast. Selling while it's still rising is what gets you paid for it.

Where to start

Three questions:

If you don't know the answer to the first one, that's your first step.

As a Certified Exit Planning Advisor (CEPA), this is the work I do with owners at The Fractionals. Not just planning the sale. Building the business that's worth selling.

You don't have to like your first valuation.
You just have to get one.