Whether you define an SMB in terms of employee numbers or some other metric the evidence points to the majority of employment is created by SMBs.
Are these businesses actually creating value? Are these businesses becoming more valuable over time. In the U.S. there are 5.92 million SMBs defined as having 999 or less employees. That’s 99.97% of the total number of firms and they employ 54.6% of the 120m employed. But if only 5,900 firms sold out for $10m or more last year (and over 6000 sold out for an average of $155,000) then one is left wondering if potential is being wasted (of course not everyone wants to build to sell).
Here my favorite questions to ask every 6 months. Are you getting better or worse relative to these issues? Because I believe they drive value creation.
The Questions
- Is your story becoming more compelling or less compelling? Are your sales leads improving?
- No customer accounts for more than 5% of sales.
- Growth drives value. A company growing sales at 20% plus could be worth more than a much larger competitor with low growth. If SaaS then MRR and related ratios are showing momentum. Growth is better or worse?
- Your business is not dependent on you.
- Your margins are one of the best in the industry.
- Market share is improving.
- Cash flow is strong and can easily fund the next 6 months.
- Quality of talent is improving.
- Quality of staff training is improving.
- Your product road map continues to be better defined and legacy products don’t dominate the sales line.
