As the owner of a private business you must wonder from time to time what your business is really worth. I’ve blogged before about the valuation of private companies. In the end it comes down to beauty is in the eye of the beholder as Facebook proved buying the pre-revenue Instagram photo sharing app for a cool $1Bn.
Don’t even try to divide that number by 40 million users and justify a price to me!
One thing is certainly true, grabbing attention and specifically users is the start of a business model but I don’t believe you can call it a business model until you charge money for the service. Building a business for a specific buyer is a long odds game. However building a business with an eye on what buyers admire and cherish is a very good idea. It forces the owner of a business to work on the right stuff. A summary of the stuff that buyers cherish was covered here.
Crazy Statistics
As you consider building your business and hopefully your value it is worth considering these US statistics I’ve gathered for you:
- 27.3 million – the number of businesses in the US – (US census data)
- 26.7 million – the number of businesses employing 19 people or less – (US census data)
- 5930 – the number of businesses sold last year for $10m or above (ACG)
- 6703 – number of small businesses sold last year that BizBuySell tracks. Average exit value of $155,000. (that’s right $155k)
- My estimate of all small business sales given that BizBuySell are the biggest broker with a small market share, is around 200,000 deals. But the average value I estimate is in the $100k to $150k range.
- So around 99% of business owners are not realizing sufficient cash to live off.
