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What a Study of 14,000 Businesses Reveals About How You Should Not Be Spending Your Time

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In an analysis of more than 14,000 businesses, a new study finds the most valuable companies take a contrarian approach to the boss doing the selling.

Who does the selling in your business?  My guess is that when you’re personally involved in doing the selling, your business is a whole lot more profitable than the months when you leave the selling to others.

That makes sense because you’re likely the most passionate advocate for your business. You have the most industry knowledge and the widest network of industry connections.

If your goal is to maximize your company’s profit at all costs, you may have come to the conclusion that you should spend most of your time out of the office selling, and leave the dirty work of operating your businesses to your underlings.

However, if your goal is to build a valuable company—one you can sell down the road—you can’t be your company’s number one salesperson. In fact, the less you know your customers personally, the more valuable your business.

The Proof: A Study of 14,000 Businesses

They asked 14,000 business owners if they had received an offer to buy their business in the last 12 months, and if so, what multiple of their pre-tax profit the offer represented. We then compared the offer made to the following question:

Which of the following best describes your personal relationship with your company’s customers?

  • I know each of my customers by first name and they expect that I personally get involved when they buy from my company.
  • I know most of my customers by first name and they usually want to deal with me rather than one of my employees.
  • I know some of my customers by first name and a few of them prefer to deal with me rather than one of my employees.
  • I don’t know my customers personally and rarely get involved in serving an individual customer.

2.93 vs. 4.49 Times

The average offer received among all of the businesses we analyzed was 3.7 times pre-tax profit. However, when we isolated just those businesses where the owner does not know his/her customers personally and rarely gets involved in serving an individual customer, the offer multiple went up to 4.49.

Companies where the founder knows each of his/her customers by first name get discounted, earning offers of just 2.93 times pre-tax profit.

When Value Is the Enemy of Profit

Who you get to do the selling in your company is just one of many examples where the actions you take to build a valuable company are different than what you do to maximize your profit.  If all you wanted was a fat bottom line, you likely wouldn’t invest in upgrading your website or spend much time thinking about the squishy business of company culture.

How much money you make each year is important, but how you earn that profit will have a greater impact on the value of your company in the long run.

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Do you want to be a Business Runner or a Business Owner?

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To achieve anything meaningful, you need to be clear on where you are going and why. In business, a lot of it comes down to this question;

Do you want to be a business runner or a business owner?

A business runner makes a good living. A business runner sells products and/or services. He/she runs a business and profits from the operations of the business. Whereas a business runner sells products and/or services and profits from the operations of the business, a business owner sells entire businesses… so his/her product/service is the business itself and when they sell entire businesses they can make the equivalent of several years or decades worth of income from that one transaction, but it requires a different mindset to achieve this and I will show you how.

“Build your business with the exit in mind”

Exiting your business is more than just a simple process of preparing it for sale, negotiating a deal, and then surrendering control to a qualified buyer. It is a psychological process for the business owner who has to move from a growth plan to an exit plan. All in all, it requires a massive shift in mindset to successfully accomplish.

Before reading this blog, most of us who are business owners see exiting our business as something that’s better left for the distant future or a situation that might only happen in the event of some significant failure. Few of us see selling our business as an objective in its own right.

We are generally so consumed with the daily operations and needs of the business that selling is the furthest thing from our minds. And even if we understand the financial gains we might make when they sell, we generally feel like we have more to give, and like we can make the business more profitable than it has ever been.

Only once we understand how high growth potential can be leveraged into the sale value do we business owners really consider the alternatives of staying with the business or selling it to a potential investor.

Selling your business successfully, the way I have shown you, will change your life for the better in more ways than one way, which is exactly why you need to make a Maximum Exit plan. You don’t want to spend your life building your business only to falter at the last hurdle and fail to properly prepare it so that it generates the highest possible exit price for you.

Selling your business is arguably the single most important decision you’ll make in your professional career, and when done correctly, it has the power to propel you into a new lifestyle class… one you have worked your whole business life to get to, plus the smaller benefits of knowing you did it, you did well and all of the associated personal pride, sense of accomplishment and personal prestige that knowing this about yourself brings you.

From the topics we have discussed, the benefits, that a systematic approach to exiting your business for the maximum sum, are abundantly clear.

At the end of the day, the most important personal outcome, that has an impact on the rest of your life, from exit planning is the sum that you the business owner receives in exchange for your busines

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