5 Easy Ways to Achieve an $18 Billion Valuation for Your Company
Uber, the taxi sharing service, was founded five years ago. It has about a thousand employees and operates in 130 companies.
Uber is now valued at approximately $18 billion.
At this valuation, Uber is worth more than Hertz ($12.4 billion), United Continental Holdings ($17.9 billion), Sony ($16.8 billion) and a host of other well known brands that have been in existence for decades, have thousands of employees and customers, continuous revenue streams, tangible assets and track records.
Is this a bubble? Nah! Is Uber worth $18 billion? Hey, why not? But that doesn't matter. What matters is that a lot of smart people believe it's worth $18 billion, and there are a lot of smart pundits and analysts who will back up this belief too.
Do you believe that your company is worth $18 billion like Uber? OK, maybe not right now. But it can be. Yes, it can be.
I know you're just a small manufacturer or distributor or service firm selling unsexy products. Sure, you're located near the airport, employ only about 50 or a couple of hundred people and are not on the radar of any Silicon Valley venture capitalists. But don't worry. You too can achieve an $18 billion valuation for your company! You just need to take these five simple steps in order to maximize what your company's worth. Ready to cash in?
Step 1: Get a valuation now.
Like most business owners, you're probably thinking that your company is worth somewhere between $5 to $6 billion, give or take a few hundred million. Am I right? But why be in the dark?
Instead of walking around with some arbitrary number in your mind, hire someone to perform a valuation of your business. You can find that person at the International Business Broker's Association or the American Society of Appraisers, or just ask your CPA or attorney for a recommendation.
An expert will come up with a market value based on a number of formulas and give you perspective as to what both your company's tangible and intangible assets are worth. You'll pay for this, probably anywhere from $5,000 to $50,000 depending on the size of your business. But you'll get a reasonable market value estimate from a professional that will help set the benchmark. You will also be told which parts of your balance sheet are undervalued (What shape is your inventory in? Why are intangibles valued so low?) so you can take necessary actions to get these numbers up to that $18 billion sweet spot you're dreaming of.
Step 2: Have a long-term plan.
Unless you're under duress, you hopefully won't be considering a sale for a while, at least for three to five years. That's good. You don't want to leave billions on the table. Smart business people think ahead. So you'll do the same. What steps do you need to take to increase the value of your business to $18 billion over the next few years? What contracts should be in place? What capital improvements need to be made? What changes in your organization need to occur? These things won't happen overnight. It took Uber five long years to get their valuation up to $18 billion, so you must have some patience, too, If you give yourself a few years, you can take the time and apply the resources to spruce up your business so that it is as attractive as possible to a potential buyer. And really, shouldn't you be operating with this type of mindset anyway?
Step 3: Go on an extended vacation.
You may be a very nice guy, but a prospective buyer doesn't care. If he's going to fork over $18 billion. he will want to minimize your future involvement as much as possible. Is this possible now? Can you leave your company in the hands of your managers for a few weeks at a time while you travel the world? Do you have a strong enough infrastructure, with processes, policies and procedures in place to handle the day-to-day flow of work without your detailed involvement? Do you have systems in place? To truly be worth $18 billion, you must prove that your organization needs to run, at least for a time, without you being around. If that's not possible, if you're the heart and soul and need to be present at all times, then you're only hurting your valuation. You need to make organizational changes and put the right management team in place to do this if you want get as big a payout as possible.
Step 4: Have a hobby.
And it shouldn't be your business. People that are too passionate about their business make foolish choices based on emotion. Uber's co-found and CEO Travis Kalanick doesn't appear to be a foolish guy. I'm sure he considers the company to be his baby, just like any entrepreneur. But given that he's selling off pieces of it to investors and is rumored to be contemplating an IPO leads me to believe that he's a businessman at heart, and not a poet. Your business should be viewed as an asset. Great business leaders from GE's Jack Welch to Donald Trump are known for buying and selling entire companies or pieces of organizations just because they got a good price. You will need to have the same attitude if you expect to get $18 billion for your company someday.
Step 5: OK, I've lied to you.
I know your business is awesome and special and saving the world. But it will never, ever, ever be worth $18 billion. Sorry. Did you believe me? Then, good for you! Yes, you're a little delusional. But you also have a giant ego and a large sense of self-worth. And that's the fifth way to get the most money from a potential seller: by making him feel that he's about to buy something truly valuable and extraordinary and worth $18 billion. You are a salesperson, so package up your product (that's your company) and have reasons for why it's worth so much more than it's balance sheet. Maybe you've got a great location, a powerful customer list and a talented set of employees. Or maybe the market is about to explode. Perhaps there's a patent pending. All that aside, your belief and pride and love of what you've done will be infectious. And your buyer will pay for that.
Oh c'mon, you knew you'd never get Uber-money. But you can still get a lot more for your business then you think. Maybe a billion. Or two?
GENE MARKS | Columnist | Owner, Marks Group
Gene Marks is a columnist, author, and small-business owner. He oversees the Marks Group, a 10-person technology consultancy to small and medium-size businesses. A certified public accountant, Marks has also worked in the entrepreneurial services arm of KPMG. He writes for The New York Times, Forbes, and The Huffington Post.