Episode #24


Selling a Franchise: How I Look at Valuation

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 best advice in this episode of Franchise Secrets. Check it out!

Outline of This Episode

  • [2:00] How I Look at Valuation
  • [2:45] How to structure your business for better resale value
  • [6:50] Buy your time back: Remove yourself from day-to-day operations
  • [9:25] Hire people that you can truly empower

A couple of common ways a business is valuated

  1. EBITDA: Earnings before interest, taxes, depreciation, and amortization. It is a measure of a company’s operating performance. You’re measuring cash-flow.
  2. 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).

I think both of these things can be important, but to grow, diversify, and scale your business there is one thing that is more important. Keep listening to find out.

The easiest way to increase what your business is worth

Remove yourself from the day-to-day operations of your business. It’s that simple.

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 have to think about it. An investor looking to purchase a business does not want 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.

Hire the right people that you can empower

The first step in buying back your time? Hire an executive assistant. Someone to take day-to-day tasks off your plate. Decide what your time is worth, and invest your time into things that only you can do. Parse other tasks out to people you trust to carry out the work.

The goal is to build a team that you trust to run your business without you present. You need to know if you’re sick and in the hospital that your business will continue to thrive. You want to be able to take a 3-week vacation and be comfortable with what you come back to.

Hire people who are capable of operating as owners and have the ability to make tough decisions. Hire a team of people full of integrity. Invest your time in them, give them avenues for growth, and be available to them. But the end goal should be that they are efficient and independent of you.

Listen to the full episode for more details and tips and how to increase your valuation!

Resources & People Mentioned

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