Select Page
Clear all

Value of Small Business

Trusted Member Registered

One of the most common challenges for any small business is determining what their worth is. This is different than establishing their value as value is dependent on the marketplace, competition, skill set, and exclusivity. These elements are external to the business and can be measured objectively. Worth, on the other hand, is an internal measurement and subjective in nature. Worth has more to do with innate talent, confidence (belief in one's abilities), core ethics, and other less well defined and measurable benefits.

Too often it seems, small business owners struggle with their worth versus their value. They can easily put a price on their service or product based on value but less readily incorporate their true worth in that price. It is the worth factor that determines if a caterer charges $20 per person or $55 per person for a menu, not necessarily the cost of ingredients. The ingredient that is most important is the worth of the creative talent. Just as in interior design it is the worth of the designer that establishes whether to charge $65/hour or $200/hour in the same marketplace. It often has little to do with education and training and much more to do with a subjective valuation of talent and confidence.

To really get what you are worth, it is vital to establish that worth and make it a benefit that you can accept, promote, and be proud of. Often when business owners want to raise their rates they are pushing beyond their own limitations and going beyond their comfort zone. They measure their worth by what they would spend or afford, not by what they provide. I learned quickly in design that I have a much greater worth than value and that enables me to state my hourly fee with confidence and ease. If I didn't believe that I was worth more than twice my value, I would stumble over the words.

If price were no object, and you could charge what you are worth, what would that be? If it were not based on the marketplace and competition, what is your hourly fee? Look hard at this number and then review your marketplace and competition and more importantly your USP, unique selling proposition, this is the single element or collection of elements that sets you apart in business. This is the reason you should be hired or contracted instead of someone else. Rarely is it a price point, more often it is a singular product or service difference. Or it may be an education, experience, or talent difference. When most business owners are asked what they are worth, they often say "more than I'm getting,"� but can't say how much more or why. Once you can truly vocalize your true worth and share with clients and customers why you are worth that, you will be able to increase your value and subsequently your charges. Until you can go beyond your own boundaries of worth this will be impossible to do.

Many of us have patterns of worth established in childhood and these can be tough to change, but necessary. It is essential that you find that place where you release your worth from limitation and open up your potential. Once you have defined your worth (which can and should grow with age and experience), you will be better able to determine a realistic and fair value for your goods and services and command that price with confidence. We also fear raising rates (increasing our value) as we may lose clients. What we forget is that we often spend more of our time chasing the little customer than we do working significantly with the big customer. Defining your worth and subsequently re-establishing your value will mean more dollars to your bottom line and more profit in your pocket.

flash drive

Topic starter Posted : 02/04/2010 6:31 am
Active Member Registered

Re: Value of Small Business

The worth of a business hinges upon how much profit a purchaser can make from it, balanced by the risks involved. Past profitability and asset values are only the starting points. It is often intangible factors, such as key business relationships, which provide the most value.There are four main reasons for valuing a business
1.To help you buy or sell a business:
# mprove the business' real or perceived value.
# Choose a good time to buy or sell.
# Negotiate better terms.
# Complete a purchase more quickly.
2.To raise equity capital:
A valuation can help you agree a price for the new shares being issued.
3.To create an internal market for shares:
A valuation can help you to buy and sell shares in a business at a fair price.
4.To motivate management. Regular valuation is a good discipline. It can:
# Provide a measurement and incentive for management performance.
# Focus management on important issues.
# Identify areas of the business which need to be changed.

Birthday Gifts

Posted : 26/08/2010 1:54 am