Enjoy this post from the 2014 Shirlaws Australia Conference. The 2015 Shirlaws Conference is now open for registration – join me and 200 fellow CEOs and business owners for 2 days of power learning, October 7-9. Click here for information and registration.
What’s your Number? Every business owner needs this valuation information https://t.co/bER76d3Jkt #Shirlaws #shircc14
— Jacob Aldridge (@jacobaldridge) October 22, 2014
Today and tomorrow I have volunteered to be the official blogger at the Shirlaws Australia Conference. This is the first of six posts.
The Shirlaws Annual Conference 2014 kicked off this morning with a video welcome outlining the challenges and excitement of running a private enterprise in Australia. It’s a message that resonates with the 127 attendees spending the next two days with us on the Gold Coast.
MC, and our Australian CEO, Tim Dwyer sets the scene.
We were here at Sanctuary Cove for our conference in 2009 – many businesses applied the lessons that year to help them through the GFC. Others were more sceptical of course…
The message is clear. This is not a hot tub conference. It’s practical. It’s here for entrepreneurs and their teams in private enterprise to personalise and apply. Are you ready for your business to JUMP? Here we go…
Do You Know Your Number?
Nic Rixon, Shirlaws Global CEO and presenter for the next two days, launches into the first session with a confronting question: Do you know your number, the number you need to retire and never work again?
It’s a critical number, even if like many entrepreneurs who love their business, you don’t have a specific plan to retire soon.
Think about 3 numbers:
- Security – what is the amount of money you would need to ensure your survival. This of this as a lump sum returning a reasonable amount of interest each year (say a conservative 5% interest).
My Security number is $1.6million – that would pay out around $80,000 per year, which my family could survive on.
- Vitality – this is now the number that gives you the energising aspects of the Lifestyle you live today.
Again, it may help to think lump sum at 5% per annum. My number is $4million
- Financial Freedom – this is the number that allows you to do what you want, whenever you want. That’s a bigger number, so dream a little.
While this is an easy exercise to guess at (I’d love $10,000 every week, which lumps up to just over $10million) Nic shares that it’s best down with your life partner with some reality. How much do you really need to fund the houses and boats you want, the travel you want to take each year, the walking around money you desire? In his experience, this number is actually a lot smaller than most people think.
So let’s talk Business Valuation. In private business, think V = P x M. Valuation = Profit x Multiple.
Both are important. Your Multiple gives you the most leverage. But in most businesses, everyone is focused on Profit and no one is working on Multiple.
Where are you spending your time?
So what impacts the Valuation of your business? Factors that diminish your valuation include revenue and costs that don’t meet benchmarks, abnormal assets or liabilities, as well as inadequate management team capability and uncontrollable paradigm shifts (think buggy whip manufacturers).
Then there are those elements that will grow your business valuation, in some cases by many, many times. That’s the Multiple. And we can show you how to build them.
Key Learnings from Day One Session One:
- Everybody has a Number
- In private enterprise, that Number in involves a Profit x a Multiple.
- The factors that impact your Multiple are known, and we can help you build them.
For more information, call Jacob Aldridge and Shirlaws 1300 853 772.
Click here to read session 2: “Black Holes and No Man’s Land in Business”
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[…] And you can always choose to sell (or stay) at any point. See this morning’s session. What’s your number? […]
[…] If you focus on the negatives, your courage and confidence will dwindle. What impact will that have on achieving your Freedom number? […]