Every year, auditors sit to determine the value of their investments. It’s interesting because they have it down to almost a science. Unfortunately, it’s not.
Valuation experts have a tough time valuing startups. Forget about experts, normal people couldn’t even understand the value of a company during the dot.com boom, until the bust took place.
A man who knows the price of everything and the value of nothing – Oscar Wilde
If there’s one thing I learned from Economics, it’s that the value of a business lies in the perceived value of the beholder.
Been to Starbucks lately?
I’m a big fan, I’m happy paying for a pricy beverage, which ‘merely’ consists of ground coffee beans, hot water, sugar and some milk. All those are commodities… yet, the price of the product is a multiple of that? Why?
Because we’re paying for the experience. We’re living in the value exchange economy.
We perceive the value as greater than the dollar we’re paying. Perceived value is the reason why real estate bought for millions last year are worth only a quarter of that now. Why people pay thousand each year to belong to a golf club, because they consider it worth more than relaxing and perhaps its because its an investment in their business because of the business contacts they build on the greens.
It’s your job as a person trying to sell your business to communicate that value clearly based on what is important to the buyer – their values.
And that’s my tiff with my auditing friends, as accountants – they’ve become a commodity – it’s how they’ve positioned themselves. They devalue their own currency in the consumer’s mind – as number crunchers. And that’s why I believe they can’t understand valuation and value your business. If you don’t believe me, ask them how they valued Enron…
A onetime child prodigy, Joshua Bell was at the Metro in the middle of the morning rush hour and over 43 minutes, the violinist performed six classical pieces as 1,097 people passed by on a $3.5 million violin. Hardly anyone noticed. Three days before he appeared at the Metro station, Bell had filled the house at Boston’s stately Symphony Hall. How much did he make in that time in the Metro? $32 and change… this is from a man whose talents can command $1,000 a minute.
I ask my clients a trick question, which always elicits the same response. Here’s the question: How do you sell a $10,000 watch? Simple, place it next to a $100,000 watch… jewellery and luxury brands know this. It’s what we call “framing”.
To position your own company in the best possible manner, is your responsibility as a business owner. Unfortunately, many do not understand how to go about it.
By using a proprietary framework, you can position your company in the marketplace for the highest value. It starts with framing – framing your value as you would frame a camera shot – compose it in such a way that draws attention to the most attractive feature. Next package your company – think about how Apple packages its product. Show your prospects how your business can help them achieve their objective and value.