What Is Your Business Really Worth?

Spoiler Alert: it’s not just revenue.

Ask five people what your business is worth, and you’ll get five different answers. And in the world of service-based businesses, valuation isn’t just a formula - it’s a story.

Unlike product or technology companies, service firms often rely on relationships, reputation, and recurring expertise. That makes valuation tricky - but not impossible.

And while valuations are an important part of the exit process, don’t make this devastating mistake…

Today’s BlockbustHER BrainteasHER:

What is needed for a healthy valuation that reflects the real value of your business?

Patty’s Perspective . . .

The truth is, it doesn’t matter what your business is worth today. Even if you feel ready to exit today, that’s not how the process works.

The best outcomes come from intentionally building value, positioning your company in the market, and finding the ‘right’ buyer.

When you spend the time, energy, and money to get a business valuation early on, you’ve essentially wasted those resources for a report that will change in a few months.

Build value first and worry about the valuation later. In the meantime, work toward understanding and cleaning up these factors for a healthy valuation model:

• EBITDA or Seller’s Discretionary Earnings

Most valuations start with adjusted earnings—what the owner really makes, including perks, salary, and profit. EBITDA is essentially your cash flow.

• Multiples

Your earnings are then multiplied by an industry-standard range (often 2–5x for small firms, more for larger or specialized ones). The better your systems, team, and recurring revenue, the higher your multiple.

• Risk factors

Are you carrying debt or behind on paying your vendors? Are there other threats you need to study to avoid or handle?

• Client concentration

Having a few large clients is risky when a large percentage of your revenue comes from so few. It can also be seen as problematic if you have many clients all in the same industry.

• Owner dependency

This speaks for itself. I believe you should continue to be the ‘face’ of the company and initiate, build, and maintain client relationships, but delegate the service delivery.

• Lack of leadership succession

This is a very tricky issue, especially for women. I’ve seen women put their whole trust and faith in a person they think will be their successor, only to have their hopes dashed in dramatic ways.

• Industry volatility

Whether it is volatility in your industry or your clients’ sectors, this is a frustrating factor in your valuation. You have control over many of the factors I’ve mentioned, but not this one. The best you can do is be aware and work to mitigate the effects of changes in your markets.

What boosts value in a service firm?

• Documented systems

• Strong client retention

• Delegated service delivery (not just you doing the work)

• Brand equity

• Niche specialization

Valuation is both art and science. A firm with lower revenue but strong systems may sell for more than a larger, founder-dependent one.

Now What?

Are you stuck in your Second Act?

Have you built a profitable and valuable business but instead of feeling like there's something missing, you’re feeling like there's something more?

If you’ve built an accounting firm, a law firm, a financial services firm, a psychology practice, or a specialty consulting firm that is generating $1 million to $10 million in annual revenue, you are in a prime market.

Larger firms and companies are growing by buying other firms. This has long been the case, but we’re seeing a higher rate than ever.

In a tragic twist, I see too many women who actually lose their company instead of exiting on their own terms. The exit process is filled with pitfalls and complex issues – especially for women.

I’ve built my business as an advocate, and I specialize in helping women founders transition to their Third Act – when you’re ready to do the work you’ve always longed to do.

As your advocate, by definition, I’m looking out for your best interests. I am not taking a brokerage fee, commission, or equity. I am not motivated by how quickly the exit moves or the final dollar amounts. I want what you want – and will help you get it.

Are you ready to exit your business on your terms?

That requires a new way of thinking, new skills, a simple and elegant design, and an advocate by your side. Contact me to learn more. 

How exit-ready are you? Find out at: http://she-exits.com/