7 Deadly Sins Of Business Valuation. Before you value your Business consider the 7 deadly Sins of Business Valuation

1. The
Seven
Deadly
Sins
of
Business
Valua4on…
Pride
Greed
Fallacy
Historia
Ego
Hope
Blame
Tuesday, 25 June 13

2. 1.
PRIDE
You
think
your
business
is
worth
a
lot
of
money
because
you
have
had
it
for
20
years.
Unfortunately
it
doesn't
ma<er
how
long
you've
run
your
business.
It's
the
value
proposi@on
that
you're
offering
to
the
buyer
that
ma<ers.
You
could
have
a
business
that
you
ran
for
20
years
and
it
could
be
worth
nothing
or
you
could
have
just
started
up
a
business
and
it
could
be
worth
millions.
Business
owners
think
that
because
they
put
20
years
into
their
business
they
deserve
to
be
rewarded.
No
one
cares
how
long
you've
been
in
the
business
Tuesday, 25 June 13

3. 2.
GREED
You
think
your
business
is
worth
the
amount
of
money
you
need
to
re@re.
The
problem
is
that
it
does
not
ma<er
at
all
to
the
buyer
what
you
need
to
re@re.
The
buyer
only
wants
to
inves@gate
what
future
maintainable
earnings
are
there
for
him
or
her,
or
what
value
there
is
in
the
assets.
Otherwise
your
business
is
worth
far
less
than
your
expecta@on
.
Tuesday, 25 June 13

4. 3.
FALLACY
Accountants
and
business
owners
alike
apply
the
wrong
mul@ple
to
the
wrong
profit
figure.
There
are
generally
accepted
ranges
of
mul@ples
that
are
applied
to
par@cular
profit
classes.
One
such
mul@ple,
called
an
EBIT
mul@ple
will
be
smaller
than
another
class
called
EBITDA
for
the
same
business.
(Refer
to
our
website
glossary
of
terms
for
what
these
acronyms
mean)
Hence
you
would
need
to
apply
a
smaller
mul@ple
to
an
EBIT
than
to
an
EBITDA.
You
would
be
surprised
to
learn
how
many
so-­‐called
experts
apply
the
wrong
mul@ple
to
the
profit
figure.
Tuesday, 25 June 13

5. 4.
HISTORIA
This
is
the
sin
of
looking
to
history
when
looking
for
the
profit
figure.
History
and
past
events
are
relevant
but
are
only
as
a
guide.
Many
people
look
to
the
most
recent
tax
return
or
a
three
years
average
as
though
it
was
the
only
profit
marker.
A
buyer
is
only
interested
in
next
year’s
profit.
Work
on
that
one
and
leave
last
year’s
as
a
guide
only.
Tuesday, 25 June 13

6. 5.
EGO
Business
owners
think
their
business
is
worth
the
same
to
a
buyer
as
it
is
to
them.
They
think
of
themselves
and
not
the
buyer.
The
mistake
they
making
here
is
not
taking
into
account
the
risk
of
the
transac@on.
The
risk
of
the
transac@on
can
be
the
risk
of
losing
10%
of
the
clients
or
90%
of
the
clients,
depending
on
the
rela@onship
that
the
business
owner
has
with
the
client's.
There
are
many
other
risks
of
the
transac@on
including
loss
of
key
staff,
degrading
of
rela@onships
with
key
suppliers
and
other
risks
inherent
in
a
new
boss
moving
into
the
Managing
Director's
office.
The
key
is
to
take
steps
to
remove
the
risk
from
the
transac@on.
Tuesday, 25 June 13

7. 6.
HOPE
As
opposed
to
Historia,
which
is
obsession
with
the
past,
Hope
is
the
opposite.
It
is
empty
belief.
“I
hope
my
business
is
going
to
improve.”
“I
hope
my
business
will
be
worth
a
lot
of
money.”
“I
hope
someone
will
buy
it”
Sorry,
it
will
only
improve
in
profit
and
value
and
sell
for
good
money
if
you
make
it
happen.
Op@mism
is
a
great
way
to
live.
Hope
is
just
despera@on.
Tuesday, 25 June 13

8. 7.
BLAME
Business
owners
like
to
blame
others
for
the
state
of
their
business.
“My
business
is
worth
a
million
dollars
and
if
its
not
it’s
the
fault
of
the
government,
the
economy,
my
opposi@on,
the
internet,
Google,
interest
rates,
the
high
dollar,
the
low
dollar,
consumer
confidence,
business
confidence...”
anything
that
lets
them
off
the
hook.
Blame
excuses
ac@on.
No
ac@on
means
that
the
business
will
never
grow
in
value.
Tuesday, 25 June 13

9. If
You
Want
To
Maximise
Your
Business
Visit:
9
www.bc.com.au/maximise.html
Tuesday, 25 June 13

10. For
Advice
On
Business
Valua@on:
10
BCI
Business
Brokers
Tony
Arena
(Managing
Director)
3/1
Alexander
Street,
Crows
Nest,
NSW,
2065
Phone:
+61
2
94393399
Mobile:
+61
411888148
Email:
trena@bc.com.au
Tuesday, 25 June 13

11. For
More
Informa4on
On
Business
Valua4on
Visit
Our
Website:
11
www.valueabusiness.com.au
Tuesday, 25 June 13