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Are You Thinking of the End Game When Managing Your Business?

By: Dave Berkus


Thinking of the End Game

Ever think about growing your business with the plan to sell it someday, cashing in on your hard-earned work over the years? Or if you’re an employee with stock options, are you aware of the increases in value you can make with your efforts?

Then again, you may be an architect or doctor or other professional managing your business, knowing that the end game value of your client or patient list is small and not easily transferred to any buyer without attrition. In such a case, there is little advice here unless you think outside of your day-to-day profession and create a valuable leave-behind encasing your knowledge and experience that can be replicated and scaled to a large business—even if by others.

Is your business one that may be sold for profit someday?

Most businesses fall into the class of those that can be sold someday to a willing buyer. Even small community service-providers can be sold to buyers hungry to get into a business already in revenue with a steady customer base. And many businesses are created with the express purpose of growing them in size and attractiveness to be ready to sell someday to create some degree of wealth for the shareholders.

What if you’ve taken outside investors over the years?

Accepting venture or angel money is to create a contract between the investors and the entrepreneur that the business will someday be sold or even go public to create an exit for the investors.

All businesses and their management should be aware and perhaps planning for the end game, and that includes boards of directors as well. It starts with each early step in the process of building the enterprise.

What creates value in a business?

Is your value proposition for an eventual buyer that you have some secret sauce that allows you to compete more effectively against competition? Do you already dominate a niche, no matter how small, that a buyer will someday want for itself? Do you have intellectual property that is valuable to you but might be more so to a buyer?

These questions are just a few that I’d ask during strategic planning sessions each year to fine tune the value proposition for an eventual buyer. And I’d go further. Investments into the company, whether from new money or reinvesting profits, should be directed first into areas that will increase the value of the enterprise at the end game. You do this for yourself and your shareholders, and you should be thinking of this regularly.

Published: August 29, 2018

Source: Berkonomics

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Dave Berkus

Dave Berkus is a noted speaker, author and early stage private equity investor. He is acknowledged as one of the most active angel investors in the country, having made and actively participated in over 87 technology investments during the past decade. He currently manages two angel VC funds (Berkus Technology Ventures, LLC and Kodiak Ventures, L.P.) Dave is past Chairman of the Tech Coast Angels, one of the largest angel networks in the United States. Dave is author of “Basic Berkonomics,” “Berkonomics,” “Advanced Berkonomics,” “Extending the Runway,” and the Small Business Success Collection. Find out more at Berkus.com or contact Dave at dberkus@berkus.com

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