How to Determine the Value of a Business

By: Taylor Fernley 

how to determine the value of a business - Fernley & Fernley association management companyHow many times have we signed up for an educational program and the day before asked ourselves…WHAT WAS I THINKING? Well, that played out for yours truly recently despite the topical subject being delivered on ‘’How to Determine the Value of a Business.” 

It’s important, of course to hear, but not on my immediate radar screen. So, I dutifully attended and was bowled over with the amount of valuable information for small-mid sized business owners that I now want to share a portion of with you.

First of all, 4 quick stats when determining the value of a business:

  1. 10,000 baby boomers turn 65 every year
  2. 66% of privately-held companies are owned by baby boomers
  3. 20-30% of businesses that go to market and actually sell
  4. 3 out of 4 sellers fall victim to “seller remorse”

So, what are these stats telling us?

Answer: We are on the back 9 in golfing parlance and need to begin talk about our exit strategies, particularly those of you baby boomers (me included).

Here are my TOP 5 takeaways:

  1. Selling your business can be likened to selling your house – BE PREPARED!
  2. Maintain good financials – KNOW YOUR NUMBERS
  3. Surround yourself with trusted advisors – DUH!!
  4. Communicate-Communicate-Communicate with your Employees – NEVER FORGET IT WAS THEY WHO GOT YOU TO THE BIG DANCE.
  5. Execute on process and technology – DO NOT TAKE SHORTCUTS, OR SUFFER THE CONSEQUENCES

Your business is one of your greatest assets. At the expense of being redundant, surround yourself with sound, trusted advisors, who will offer candid advice and not just tell you what you want to hear.

What does this have to do with associations?

Regardless of the “nature” of the business – corporation, small business, non-profit, etc. – it’s important to focus on the top 5 takeaways. You must have a plan, surround yourself with strong leadership and staff, lean on trusted advisors, communicate effectively, execute on process to ensure you have a proven and effective methodology.

Associations often run lean – whether because of budget constraints or because they have an innate “we can do it all” mindset.  While admirable, it can lead to inefficiencies and eventually turnover and membership decline. Fernley & Fernley has been around since the 1800’s… we’ve seen it all.

My recommendation is for organizations to… 

  1. Take stock of your foundation and work towards your mission.
  2. Surround your association with a team – in-house or outsourced – that will work equally towards achieving your mission.
  3. Document processes and financials. Monitor both often.
  4. Know your limitations and manage expectations.
  5. Communicate both internally – your team and members and externally – your prospects and community you serve.

If you’d like to discuss your organization goals with us, please contact us. We’d be happy to review an RFP or sometimes… it’s an informal phone call is a great start. 

All the best going forward…

Taylor Fernley