- Companies need to know the fundaementals of why they have their own business and what is driving them.
SAN FRANCISCO — Your company’s valuation is arguably the most important number in your business. Calculating the economic value of your company — the thing you’ve worked so long and hard to perfect — can be very personal.
As the owner, you obviously want your work — your enterprise, your “baby” — to reflect the highest value possible, and there are ways to make that happen. Everyone sharpened their pencils today at the Indie Broker Summit as Real Trends’ Steve Murray shared five ways to increase their company’s valuation.
1. Know your purpose
Before anything, you have to answer two questions:
- Why do you have a brokerage?
- What is it you want to do for yourself and your family?
“Are you doing this to build equity? To create dividends and profits? Or are you doing it because you want the personal satisfaction of owning your own company?” he asked the audience.
“People say it’s a little of three. No — pick one. If you can’t decide how to answer that question, meet up with some advisers and come up with the answer.”
2. Establish your beliefs
Then, you have to answer the question: What is it you believe?
Murray used The Group Inc. as an example. It is a Colorado-based agency that was established 43 years ago, and it is the home of Ninja Selling.
The Group Inc. believes 1) they will never recruit experienced agents, 2) they excel at training new agents and 3) the two previous beliefs have been their recipe for success all these years.
3. Tech doesn’t equate to worth
His third recommendation was to forget technology as a basis for valuation of your business.
“I have never sold a brokerage ever in 31 years where the buyer paid anything for the technology,” he said. It’s a tool, that’s all, he said.
“I don’t mean to say that tech is not important, but don’t be chasing it. The highest value companies … nobody on the buy side cares a whit about the tech platform.”
Tech may have enabled them to grow, but to create value, you need tech to have helped them to recruit and develop talent, he said.
4. Have a solid thought foundation
No. 4 is to focus on the fundamentals, said the Real Trends president.
“Ask yourself, ‘Why do I own a brokerage company?’, ‘Who am I?’, ‘What do I believe?’ Have some kind of niche that is yours — something you believe wholeheartedly in — rather than chasing the shiny penny.”
5. Track company ‘health’
Lastly, if you want to create more value for your business, you have to keep the business organized. Collect records to show you are monitoring key areas of the business, said Murray.
“Take five, six, eight data points that are critical to how you are doing — productivity per agent, gross revenue per agent, for instance. Track things that you think are the most important to your business that are true measurements of the company’s health.”