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Although always the case, it’s becoming more and more evident that all the value in a business starts with a list of clients. Below, I’ll list the method by which a business SHOULD be valued, and I’ll back it up with an article that appeared in today’s financial review.
By the way, NONE of the assets I refer to here are listed on an accountant’s balance sheet. Things like plant and equipment, stock, staff, turn over, profit, patents, trademarks etc are valueless in reality without a list of clients that you are in a positive relationship with.
So it’s obvious that number 1 on the list is:
1. All the value is in the customer list and the relationship you have with them.
What you’ll discover below is that eBay has purchased the relatively fledgling company of Skype, which has 61 million users on it’s database that’s growing at the rate of 170,000 per day for the grand sum of $5.3 billion. That’s $5.3 BILLION.
From here I won’t list them in any particular order. It’s argumentative and of no relevance. Suffice to say, the next two ways of valuing a business are equally important.
2. Your reputation with your customer… What you’re KNOWN for. An example of this is Footwear Industries – Steel Blue Boots, with their comfort guarantee… “The World’s Most Comfortable Work Boot… Guaranteed”.
3. Your marketing system. You must have a system for acquiring, selling too, keeping and extracting maximum value from your herd. Otherwise you’re at the mercy of a buyers system for buying (or not). No surprises to any of you here, and it’s the one thing we’re looking for in any opportunity, a marketing system that does the work for us (identifies the prospect, makes the sale). It’s important to understand that if you don’t have a marketing and selling system, the buyer will choose to or not to do business with you based on other criteria that you have NO control over, and hence NO control over the outcome.
Posted on November 01, 2005 - 11:06 PM- Updated on November 01, 2005 - 11:06 PM