Your Business Is Worth Less Than You Think—Here’s How To Change That (#412)

412 Your Business Is Worth Less Than You Think—Here’s How To Change That
===

Jeffrey Feldberg: [00:00:00] Deep Wealth Nation, welcome to another episode of the Deep Wealth Podcast. And today it's a solo episode. Hey, let me ask you a question. Have you ever had one of those conversations that just stops you in your tracks? I got to share with you. I did just the other day. Here's the background. I was sitting in a private mastermind group with a group of some of the most successful entrepreneurs you could ever meet.

I'm talking people that have built, scaled and sold companies for eight, nine, or even more figures. From the outside looking in, most people would assume that these kind of business owners, they would have it all figured out. But here's where it got interesting. At one point, one of the members leaned in, took a sip of his coffee and said, you know what keeps me up at night? The fact that I have no idea what my business is really worth.

The heads around the mastermind group nodded, a few even chuckled, and then another business owner chimed in. And this guy, by the way, he's built a wildly profitable company. He said something that shook the room. He said, I thought I knew what my [00:01:00] company was worth until a buyer told me otherwise. 

Boom.

Silence. 

And in that moment, everyone at the table, these ultra successful battle tested entrepreneurs, they all realize something. The number for the value in their business, their enterprise value, it's in their heads. The number that they thought their business was worth in reality is probably wrong because when it comes to selling your business or even raising capital, your opinion doesn't matter.

All that matters is the market's opinion and the brutal truth, most business owners think that their business is worth a whole lot more than it actually is. And that's when I knew that wasn't just a mastermind discussion. This is a wake up call that every business owner needed to hear. Because if a group of eight and nine figure entrepreneurs can be blindsided by their business valuation, what do you think that means for everyone else?

And that's exactly what we're diving into today. Why your business is worth less than you think and what you can do about it before is too late.

What I love [00:02:00] about Deep Wealth and the Deep Wealth community is we are a community of entrepreneurs that are looking to build, grow, and when the time is right, sell the business, not just for any deal, but for the best absolute deal. So you're in the right place, but let me cut to the chase. If you think your business is worth more than what you want it to be worth, if you think your revenue profit or even your years in business are enough to command a premium, then my friend, you're in for a rude awakening because the cold hard truth, the uncomfortable truth is that your business is likely worth a whole lot less than you think.

And the real kicker, it's not because your business isn't good, it's not because you haven't worked. hard enough and it's not even because you're not profitable. It's because you don't know what the buyer actually values. And more importantly, you don't know what's sabotaging your valuation right here and now today. 

Most entrepreneurs, they make the fatal mistake of thinking. They're in control of their enterprise value, but in reality, [00:03:00] it's the market, the buyers, investors, the competitors who determine the number on your exit check. And if you walk into an exit thinking that your business is worth one thing, but buyers see it as something else, guess who wins?

You guess it. Sadly, unfortunately it's not us. It's not the entrepreneur. It's not you. So today we're going to pull back the curtain. I'm going to show you. Some of the biggest misconceptions that most business owners have when it comes to the valuation of their business, their enterprise value, and why even the most successful entrepreneurs get it wrong.

I'll reveal the hidden landmines that can destroy your businesses, enterprise value, and best of all, the simple fixes that can make buyers line up to fight for your business. So if you're ready to protect your biggest financial asset of your life, let's do it. Let's get into it. Today, we're going to pull back the curtain on the brutal truth about business valuation.

No fluff, no ego stroking, just the straight facts about why your business is worth less than you think and [00:04:00] exactly what you can do to change that starting now. I'll show you the silent killers that eat away at enterprise value, the hidden levers that can make buyers line up to compete for your business and the single biggest lie that most business owners believe.

One that if you believe could cost you millions, even your financial freedom when it comes time to sell. And listen, before I dive in, let me make one thing clear, none of this is theory. This isn't some feel good seminar talk. I'm giving you the real world battle tested strategies, both from my own experience as well as from the countless other business owners that have gone through the 90 day Deep Wealth mastery program. Because truth be told when I walked away with my nine figure exit, it wasn't luck. It wasn't timing. It was strategy and preparation. So if you're an entrepreneur and you want to stop guessing and start preparing for an exit that will forever change your life, stick around.

And Hey, if you know another business owner, who's got their head in the sand, they think they've got this thing all [00:05:00] figured out. Do them a favor, share this episode.

So at the start of this episode, you heard me say it, your business is worth less than you think, but don't take it personally. It's not about how smart you are, how hard you worked or how many zeros you see in your bank account. It's about one thing and one thing only. 

What will a buyer be actually willing to pay for your business?

And let me be crystal clear. And please don't shoot the messenger on this one. Buyers don't care about your hopes, your dreams, your blood, sweat, and tears. They care about risk. They care about growth potential. They care about how fast they can make their return on investment and then some. So let's start with a little gut check.

Imagine a buyer right now walks into your business today. armed with a magnifying glass and a ruthless, no nonsense approach. They're not here to admire your logo, your fancy office, or the awards on your wall. Instead, they're looking at your numbers, your systems, your people, and most importantly, your vulnerabilities, those hidden skeletons in the closet.

And if you don't think they're finding your weaknesses, [00:06:00] oh, you better believe they are. That's because every single business has hidden landmines that can slash its value overnight or take a deal, a potential deal off the rails that you might not see them. You might not even know they exist, but I promise you your buyer does.

And if you're not ahead of the game they'll use those landmines to justify a lower offer. They'll penalize your enterprise value or worse, they walk away completely. And now you can kiss goodbye all that time, that money, that effort that went into the process. So in this first segment, we're going to break down the biggest misconceptions that most business owners have about their enterprise value.

These are the exact myths that make you believe your business is worth more than it really is. We'll talk about why revenue is not the same as value, why being profitable doesn't mean you're sellable and why your own mindset, believe it or not, might be the biggest thing holding you back from unlocking your true worth, the best deal over any deal. So get ready to take some notes because I guarantee this is going to change the way you [00:07:00] see your business forever. 

So are you ready? 

Shall we do it?

Terrific. Let's dive in. 

I don't care how much money is flowing through your business. If a buyer looks at your numbers and sees inconsistencies, dependencies, or risks, that valuation just took a nosedive. And yet time and time again, I see countless business owners make the same mistake. They puff out their chest, show off the revenue and say, look how much money my business is making.

Well, truth be told buyers don't care. What buyers do care about well, how much of that revenue actually turns into profit? 

How reliable, predictable, and scalable is that profit? 

Let me give it to you straight. If your revenue is dependent on you, your top few clients or your best employees, then guess what?

You do not have a business. 

You have a job. 

I know that's harsh. Don't shoot the messenger. And again, nobody, let me repeat. Nobody wants to buy a job on this very podcast, The Deep Wealth Podcast how many times have you heard [00:08:00] buyers come on and say, I don't want a second job. Otherwise known as picking up the pieces from the founder, the business owner that I just bought the business from.

Instead buyers want an ATM machine. They want a machine that prints money with or without you. They want systems, not headaches. They want predictability, not surprises. So let's go deeper right now. I want you to ask yourself three questions and please be brutally honest. 

Question one. If you disappeared, if you got abducted for six months, a year, would your business still grow?

And if the answer is no, congratulations, you just told a buyer, your business is worthless without you. If you're the rainmaker, the key decision maker, the glue holding it all together, then your business isn't sellable. It's just a highly stressful full time job. And by the way, you may be saying, well, Jeffrey, wait a minute.

I have an executive team. I have a leadership team, but let me ask you this. If I were to pull them aside and I were to ask them, be honest with me, can you make those big decisions? More [00:09:00] times than not, if the answer is no, and usually it is, again, you have a job and to a buyer, they don't want another job.

They want that ATM machine. 

Now, the second question for you, how much of your revenue is tied to just a few big customers

? If one or two clients are making up 20, 25, 30 percent of your revenue, buyers see that as a massive red flag. Because let's face it. If one of them walks away. There goes your valuation.

And I can't tell you how many times that Deep Wealth, when we're going through the Deep Wealth Mastery program, a very proud entrepreneur will share with us well, here's my top two, three clients. They make up 30, 40, 50 percent of the revenue. And when we walk through with them, well, what if there's a change in ownership?

What if your client sells heaven forbid, what if something happens to your client? 

What if there's a change in leadership? 

What if there's a change in the marketplace? 

So we always want to make sure that your revenue is as dispersed as possible. So in other words, if one of your biggest clients left, you wouldn't feel it, they wouldn't make a dent in your overall profitability, your overall growth.

Now, the third [00:10:00] question, do you have systems that drive revenue or are you making it up as you go? 

And full confession here. In the early days at Embanet, this was me, this was Embanet. We were making it up. I was making it up as I went along. A real business has processes. They're documented procedures. They are repeatable systems. And by the way, they don't rely on luck or heroics. Yes. Luck is not a business model. If your system, and I'm using air quotes, if it's winging it day by day. Buyers will either low ball you, they'll penalize your enterprise value or they'll walk away entirely. 

Now let's be real.

If you're like most business owners, you're probably failing at least one of these three tests. And if that's what's going on, hey, no worries. That's okay. At least for now.

Because here's the really good news. Valuation isn't set in stone. What your business is worth today is not what it has to be worth tomorrow. 

And in a minute, I'm going to show you the exact levers you can pull [00:11:00] right now to turn your business into one that buyers will fight over. 

But before we get there, let's tackle another brutal truth. 

Just because your business is profitable doesn't mean it's sellable. 

Now you may be asking, Jeffrey, what are you talking about?

All the profits in the world, how could it not be sellable? 

Stay with me. 

So let's get this straight. 

_*Profitability does not equal sellability. *_

I don't care how many years you've been in business, how high your margins are, or how in demand you think your company is. None of that means a squat if a buyer looks under the hood and sees a business that's fragile, unpredictable, or dependent on things outside of their control.

Yes even if you're pulling in a nice seven, eight or nine figure profit every year, if a buyer sees risk, they will walk away or worse low ball you into oblivion. 

And let me tell you something. 

Buyers are professional bargain hunters. Let's put buyers off to the side for just a moment. Look at yourself when you're going to be buying let's say a [00:12:00] house or an asset, or you're investing in something. 

Do you want to pay the highest price? 

Of course not. 

Do you want to find the best value? 

Of course you do. So you're always looking for ways to get something for the best value that you're not paying top dollar. And why would it be different with your future buyer or your future investor?

They're looking for any reason, any tiny crack in the foundation to tell you that your business isn't worth what you think it is. And if you're not prepared. You're going to fall right into the trap. So let me hit you with a quick gut check. 

Three reasons why a profitable business might still be unsellable.

Number one, lack of recurring revenue means lack of predictability. Buyers love predictable cashflow. Heck. The human condition. We love predictability. We don't like change and is no different for buyers. It's why subscription businesses, they get these crazy valuations while traditional service businesses get the short end of the stick.

Hey, it's not fair. I get it, but I didn't make the rules. [00:13:00] If your revenue, if your business model is a one and done instead of recurring, then buyers see your business as a gamble, not an asset. If you don't have long term contracts, retainer clients, or a locked in revenue stream well your business is like a roller coaster and buyers hate roller coasters.

Well, what's the solution? 

Turn your business into an annuity, find ways to create repeat customers and long term contracts. And before I get to point number two, let's go back to my e-learning company. Embanet. If you recall, there was Embanet 1 and Embanet 2 

Embanet 1 we just got things rolling. I was figuring things out with my business partners. It was not a subscription business. It was not long term contracts. There was a lot that it wasn't.

But Embanet 2 was a complete game changer. Embanet 2 was a subscription business. We had long term contracts. We had revenue sharing and exclusivity.

And by the way, had Embanet 1 gone to market, [00:14:00] thankfully it never did, had Embanet 1 gone to market, I would not be here. There would not have been a nine figure exit. I saw the difference of what it did for the company first and then later when we're in market in a liquidity event of having the right kind of business model.

And that's why our nine figure exit and the Deep Wealth nine step roadmap is so powerful. It's strategies from the trenches that work. And specifically in this case. Step two X factors and step three future buyer in the Deep Wealth 9-step roadmap. Talk all about that. Now getting back here, let's go to point number two, the key person risk and a key person risk.

If your business relies on you or a small handful of people, guess what? In the business world, that is a death sentence. 

I said it before, and I'll say it again. If you are the business, you have nothing to sell. Buyers don't want to buy a house of cards. They want to buy an autonomous machine. They want that ATM machine. That's printing money, whether you're there or not. So if you're the decision maker, the deal closer, the problem solver, well, again, don't shoot the [00:15:00] messenger without you, there's no business. And that means buyers won't touch it. 

The solution? 

Let's put systems, people, and automation in place. If your company can't run smoothly without you, fix it. 

Now you have the time. The sooner you can do it, the better. 

And on point three, cash flow delays are red flags for buyers.

Buyers are looking for consistent, reliable, and quick turn cash flow. If your cash is tied up in accounts receivable, your business looks like a financial headache waiting to happen. If you don't have a clear, efficient cash cycle, A buyer will assume they'll have to fix it and they will dock or penalize your enterprise value accordingly.

Solution, clean up your books, shorten your receivable cycles and make your cashflow bulletproof. Better yet put in the ultimate business model. And we talk all about that, both on the podcast and the Deep Wealth mastery program, clean up those things. And now buyers are. flocking to you. They want your business, your enterprise [00:16:00] value shoots through the roof.

So let me ask you, if a buyer walked into your business right now today, would they see an investment or liability? 

And please be honest, be honest with yourself. 

Will they see a profit machine or a time bomb? 

Because if it's the latter, you have two choices. One, you could do nothing. You pretend that, well, it doesn't apply to you and watch your future buyer pick apart your business like a vulture on roadkill or two, you can fix the issues right now and make your business, the kind of irresistible high value asset that buyers will compete for your choice. It always is. 

Now, if you're thinking Jeffrey, I get it, but how do I actually make my business sellable? 

Well, I'm glad you asked because in the next segment, I'm going to show you exactly how to increase your business value without working harder.

Yes, without working harder. We're talking hidden assets, those Rembrandts hidden in the attic, those undervalued resources and strategic moves that will put more money in your pocket when it's time to sell. 

So what do you [00:17:00] think, should we do it? 

Amazing. 

Let's dive in. So in the third segment, how to increase your business value without working harder, what I want you to get right now is that your business isn't worth what you think it is. It's worth what a buyer is willing to pay.

And if you're like most business owners, you're probably realizing you have some blind spots, maybe some cracks in the foundation that a buyer would love to use against you. So now let's talk about how do you actually fix it. 

But here's the kicker. You don't have to work harder. You don't need to double your revenue.

You don't need to burn yourself out. You do need a strategy. So here are the three quickest ways to boost your business value without killing yourself in the process. Number one, I want you to find that Rembrandt in the attic or those Rembrandts in the attic. Remember here at Deep Wealth, when we call something a Rembrandt, it's a hidden asset that buyers will pay more for.

Most businesses are sitting on a hidden value that they don't even see, but a buyer likely will, and they're not going to tell you, maybe it's data. You have a treasure trove of customer insights that a buyer would pay a premium for. Maybe it's brand [00:18:00] positioning. You dominate a particular segment that a large company wants access to.

Maybe it's an underutilized intellectual property. Patents, processes, proprietary knowledge. That's gold in the right hands. So I want you to look at your business from an outsider's perspective. What do you have that perhaps you've overlooked? That's rare. It's unique, unique to your business. No one else is very difficult to replicate.

That's your hidden leverage. In the case of Mbonet, well, we had a number of those. We had these 10 year exclusive contracts. We had revenue sharing. We were very profitable. So those are just a few of what we have. 

_*Most businesses have at least one hidden Rembrandt, if not three to five. *_

The second thing I want you to think about, how can you make your business less dependent on you or for that matter, anyone else, because buyers aren't just looking at revenue, they're looking at how risky that revenue is.

If your business can't run without you, that's not a business, my friend, it's a trap, and you don't want that, your buyer doesn't want that. If you have a single [00:19:00] rockstar employee who controls key relationships, well, that's a liability, it's not an asset. If you're making money, but there's no system in place, buyers see chaos waiting to happen.

So what's your action step, what can you do? 

Document all of your key processes. Train your team, automate what you can, make your business a machine. Not a one person show. And then the third tip, the third strategy, increase your recurring revenue. Even if you've never thought about it before, buyers love, they absolutely love recurring revenue.

It's predictable, it's scalable, it's stable, and it's worth more money. If your revenue is transactional, your valuation is automatically lower. You're penalized. If it's locked in subscription based or contract driven. Well that my friend, that's where your valuation skyrockets. If you're in professional services.

Create a retainer model. If you're selling products, create a subscription offering. If you have clients on short term contracts, extend them better yet. [00:20:00] How can you get exclusive contracts? Well, I'll share a little hint with you. The more painful the problem that you're solving, the more riskier the problem that you're solving.

The more likely you are to get exclusive contracts with revenue sharing. So action step, ask yourself right now, how can I make my revenue more predictable? If a buyer sees cashflow that's guaranteed, they will pay more for your business. I'll repeat that. If a buyer sees cashflow that's guaranteed, they will pay more for your business.

Now, let me be blunt and I always am, you know, that you don't need to 10X your revenue to increase your valuation while I would love you to 10X your revenue. We do talk about that in the Deep Wealth Mastery Program. Know this and know this well, you just need to make strategic moves that buyers care about the problem.

Most business owners don't even know where to start and that's exactly why I'm talking to you today on the Deep Wealth Podcast. Why there's a 90 day Deep Wealth Mastery Program and the Nine Step Deep Wealth Roadmap. After my nine figure exit, when I began to have conversations with [00:21:00] entrepreneurs, I realized how wow, entrepreneurs, we are the hardest working people on the planet.

We change lives, we solve painful problems, but on the flip side, How could people as smart as us, as smart entrepreneurs, how could we be so stupid? 

Well, the simple answer is the skills that started business are very different to grow it, and they're very different to sell it. And so in Deep Wealth Mastery, this is, again, we took our nine figure exit, we took what worked. We made it better. We took what didn't work, reverse engineered it and put that into the 90-day Deep Wealth Mastery program. That gives you the exact roadmap to do it right. 

Without spending years trying to figure it out yourself. You are not the guinea pig. You're simply connecting the dots in a done for you system with best practices that you're applying to your business. 

Because when you sell your business let's face it, you get one chance and one chance only to do it right. So let me ask you, are you going to show up unprepared and leave millions or more on the table? 

Or are you going to take control, stack the odds in your favor and get the [00:22:00] absolute best possible deal as always, the choice is yours.

So with all that said, let's bring it home. I just walked you through exactly why most business owners are sitting on a ticking time bomb when it comes to the business value, even if they have a successful business. 

You now know revenue is not the same as value. 

Profitability, it doesn't mean your business is sellable.

Buyers are ruthless. They will find your weaknesses and use them against you. 

So let me ask you, what are you going to do about it? 

Because here's what I can tell you with certainty.

Most business owners will hear this episode, nod their heads, maybe even feel a little uncomfortable, and then go right back to business as usual. And that's why, no surprise, up to 90 percent of liquidity events fail. Think of all that time, effort, and money. It's just wasted. Even worse. That's why business owners are leaving 50 percent to over 100 percent of the deal value on the deal table or in the buyer's pocket.

But if you're still here, if [00:23:00] you're still listening, I now know something about you. You are not most business owners. You don't want any deal. You want the best deal, the kind of deal that sets you up for life. 

And to get there, you need to prepare now, not later, not someday, not tomorrow. Right now. 

And that's exactly why I created Deep Wealth Mastery.

It's not some generic overpriced cookie cutter business program. It's the exact nine step roadmap that took me from turning down a seven figure offer to securing a nine figure exit. 

And here's the best part. When you prepare for a liquidity event, the Deep Wealth way, not just any way, the Deep Wealth way, you also increase your profits today. 

More money now, more money later, more control, less risk. 

Wow. I love that. 

What's there not to love about that? 

And the best part, whether you plan to have your exit in two years or 22 years, the time is going to pass by anyways.

Why not be prepared? 

Why not show up with a bigger, more profitable business and a journey that you're enjoying along the way. [00:24:00] 

So let's be real. 

You've built something great. You've put in the time, the sweat, the sacrifices. Your business is more than just numbers on a spreadsheet.

Let's face it. It's your legacy. It's your financial future. 

But the cold, hard truth: buyers don't care. 

They don't care how hard you've worked. They don't care how much you think your business is worth. 

They care about one thing and one thing only. 

How much can they get your business for while keeping as much of your money in their pockets as possible?

Again, don't shoot the messenger. I did not make the rules. That's what they are. And if you're not 100 percent prepared, if you don't know the game they're playing, then guess what? 

You lose. 

And losing means leaving millions or more on the table and your financial freedom. 

You get one shot to do it right.

There are no do overs, no second chances. So here's what you need to do right now. 

Send an email to success at deep wealth. com, you know, success S U C C E S S at deep wealth. com. 

[00:25:00] And in the subject line put "best deal." 

That's it. 

Two words, one email, a lifetime of difference, no fluff, no gimmicks, just a powerful free resource that will show you the hidden risk that's tanking your valuation and how you can fix it.

The biggest lie business owners believe about their worth. 

The one thing that buyers look for that can skyrocket your enterprise value. 

Most business owners will ignore this. 

I get it. 

They'll wait until it's too late. 

They'll go into the liquidity event, unprepared thinking they can wing it and they will pay the price sadly, unfortunately, but if you're the kind of entrepreneur who refuses to leave money on the table, if you're the kind of business owner who wants to win, not just get by, then send that email right now.

Success at Deep Wealth. com, subject line, "best deal."

Myself, the team, we will send you exactly what you need because when it comes to your exit, you don't want any deal. You want the absolute best deal. And as a reminder, [00:26:00] preparation, what I love about that, it's the gift that keeps on giving. So Deep Wealth Nation, there you have it. 

It's official. 

This is a wrap.

And as we love to say here at DeepWell, may you always continue to thrive and prosper while you remain healthy and safe. Thank you so much. 

So there you have it, Deep Wealth Nation. What did you think? 

So with all that said and as we wrap it up, I have another question for you.

Actually, it's more of a personal favor. 

Did you find this episode helpful? 

Have you found other episodes of the Deep Wealth Podcast empowering and a game changer for your journey? 

And if you said yes, and I really hope you did, I have a small but really meaningful way that you can actually help us out and keep these episodes coming to you.

Are you ready for it? 

The dramatic pause. I'll just wait a moment. Drumroll, please. Subscribe. Please subscribe to the Deep Wealth podcast on your favorite podcast channel. When you subscribe to the Deep Wealth Podcast, you're saving yourself time. Every episode automatically comes to you, and I want you to know that we meticulously craft Every one of our episodes to have impactful [00:27:00] strategies, stories, expert insights that are designed to help you grow your profits, increase the value of your business, and yes, even optimize your post exit life and your life right now, whatever you want that to look like.

And every time you subscribe and a fellow entrepreneur subscribe, it's a testament to how together, Yes, we are. We are changing the social fabric of society. One business owner at a time, one liquidity event at a time. So don't let the momentum stop here. Subscribe now on your favorite podcast channel.

You'll never miss an episode. You'll be the first to hear from the top industry leaders, the innovators, the disruptors that are really changing and shaping the business world, and maybe you're commuting, maybe you're at the gym, maybe you're taking a well deserved break that we spoke all about on this episode.

The Deep Wealth Podcast, it's your reliable source for the next big idea that could literally revolutionize your business. So once again, please hit that subscribe button, stay connected, inspired, and ahead of the curve. And again, your next big breakthrough moment, it might just be one episode away. Maybe it was even this [00:28:00] episode.

So all that said. Thank you so much for listening. And remember your wealth isn't just about the money in the bank. It's about the depth of your journey and the impact that you're creating. So let's continue this journey together. And from the bottom of my heart, thank you so much for listening to this episode.

And as we love to say here at Deep Wealth, may you continue to thrive and prosper while you remain healthy and safe. 

Thank you so much. 

God bless.