Valuing a Small Business-
Transferring Ownership to Financial Independence
Common Sense Strategies for Valuing a Small Business Higher
Understanding What’s Needed (Part 1 of 4)
Why does anyone make an investment? Presumably because they want to make money. When one becomes a business owner, that person is making an investment. Most business owners expect their investment to increase in value. They tend to focus on the potential value increase as a primary benefit that should come from the investment. They don’t always think about the income an investment could be spinning off – but they should. The income producing capability of an investment is a major component to evaluating an investment. Let’s call these concepts of increasing value and income produced from the investment Return on Investment.
Further, most business owners come a point in there life where they hope to not have to work, to be able to live on and enjoy the fruits of the investment into their business. This means having a means to produce income that does not require working. Let’s call this concept Financial Independence.
Return on Investment and Financial Independence are not the same things. I can have a very nice return on my investment but if I don’t do certain things I won’t be able to achieve financial independence. But the opposite is not the case. It is highly unlikely as a business owner that I can achieve financial independence without getting a good return on my investment. So an adequate return on investment is necessary for achieving financial independence but does not guarantee financial independence
In this series of blogs, I’m going to be discussing specific strategies you can use to ensure that you focus on return on investment and convert it into financial independence. We’ll start by reviewing the heart and soul of value creation, profitability and cash flow. Then we will look at the specific means one can use to convert that value to financial independence.
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