24: Selling a Franchise: How I Look at Valuation

<p>Do you know how to properly look at valuation when selling a franchise? Do you know how to properly calculate what your business is worth? If you want to sell your franchise someday, you must know what its value is—and continue to increase it. I divulge some of my <strong><em>best advice</em></strong> in this episode of Franchise Secrets. Check it out!</p> <h2>Outline of This Episode</h2> <ul> <li>[2:00] How I Look at Valuation</li> <li>[2:45] How to structure your business for better resale value</li> <li>[6:50] Buy your time back: Remove yourself from day-to-day operations</li> <li>[9:25] Hire people that you can truly empower</li> </ul> <h2>A couple of common ways a business is valuated</h2> <ol> <li>EBITDA: Earnings before interest, taxes, depreciation, and amortization. It is a measure of a company’s operating performance. You’re measuring cash-flow.</li> <li>Revenue: Tracking your revenue and valuing the business by a multiplier (this is typically based on the industry—anywhere from 0.5 times the revenue to 4 times the revenue). </li> </ol> <p>I think both of these things can be important, but to grow, diversify, and scale your business there is <em>one thing </em><em>that is more important</em>. Keep listening to find out. </p> <h2>The easiest way to increase what your business is worth</h2> <p><em>Remove yourself from the day-to-day operations of your business.</em> It’s that simple.</p> <p>It may be a little harder to carry out, but if you’re even remotely thinking you’d like to sell your business someday, you <em>have to</em> think about it. An investor looking to purchase a business <em>does not want</em> to buy into something that requires them to work 40+ hour weeks. They want a high-level business that is run by high-level management that allows them to be strategists and investors.</p> <h2>Hire the right people that you can empower</h2> <p>The first step in buying back your time? <em>Hire an executive assistant</em>. Someone to take day-to-day tasks off your plate. Decide what your time is worth