The majority of small business owners do not know how much their business is worth.
Despite having one of the highest rates of entrepreneurship per capita in the world, few Australian business owners understand the current market value of their businesses.
Simon Merchant, Founder of The Merchant Report – a new online, business appraisal site – created the tool after noting many business owners are purely focused on growing their business, not appraising it.
Unlike the property market, which enjoys cheap and easy access to valuations, there is no reliable public sales database for small business owners to access information.
Another key issue is that most business owners are uncomfortable about disclosing the sale price.
“I wanted to empower business owners to feel confident that the information, general and financial, they were inputting was held confidentially, and I wanted to provide a product that didn’t require the disclosure of their name or that of their business to create their report. Most importantly, the appraisal needed to be automated for instant downloading upon completion of the critical inputs,” Merchant said.
As a result, Merchant’s product includes the current market value of a business, as well as an analysis of its strengths and weaknesses, in terms of marketability.
Similarly, Ty Wiggins, Director at Converge Business Networks believes many Australian business owners grapple with the issue of whether they are self-employed or business owners, and herein lies a problem.
“It is one of those issues that force you to think hard about what you’re trying to accomplish with your business, and whether you really have a sellable business or are [content with] being self-employed,” Wiggins said.
In his book “Built to Sell”, serial entrepreneur John Warrillow, challenges business owners to think hard about the answer to this question, and whether they would one day want, or need, to sell their business.
Regardless, Warrillow said it’s important business owners have processes and systems in place so that it can run without depending entirely on one person. This also makes the business more attractive and sellable in the future.