What’s My Offsite Business Worth?

An article by Bill Murray

Over the past few years, Gary Fleisher and I have had the opportunity to help owners think through one of the biggest decisions they’ll ever make—what comes next for their offsite business.

Some are actively considering a sale. Others simply want to understand what their business might be worth someday. A few aren’t interested in selling today but recognize that preparing early often leads to better options later. What’s been interesting is that, regardless of where they are in the process, they tend to ask many of the same questions.

Rather than answering those questions one owner at a time, I thought I’d begin addressing some of them here, drawing on more than forty years of leading offsite manufacturing operations and the advisory work Gary and I have been doing over the past several years.

“Bill, what do you think my business is worth?”

It’s an understandable question. If you’ve spent years—perhaps decades—building an offsite business, naturally you want to know what it’s worth.

My answer, however, usually isn’t what owners expect.

Before we talk about value, we need to talk about what creates value.

Those aren’t necessarily the same thing.

During my career, I’ve learned that two companies can build roughly the same number of homes, generate similar revenues, and even report comparable profits, yet one may be significantly more attractive to a buyer than the other.

The reason is simple.

Buyers don’t evaluate a business the same way owners do.

Owners naturally focus on what they’ve built. Buyers focus on the risk they’re assuming.

When I walk through a business, I’m not immediately thinking about equipment values or the financial statements. I’m watching the operation. Does production move with purpose? Do supervisors appear confident in their responsibilities? Does the organization rely on well-defined processes and systems, or does every important decision still depend on the owner? Does the business reflect discipline and accountability, or does it seem like people are simply reacting to the latest problem?

None of those observations determine value by themselves. Together, however, they begin telling an important story. Every serious buyer is trying to answer one fundamental question:

Can this business continue to succeed after the current owner steps away?

I’ve often said that buyers aren’t simply purchasing equipment, inventory, or even a building.

They’re buying confidence.

Confidence that the business is well managed. Confidence that capable people are making good decisions throughout the organization. Confidence that effective processes and systems are supporting consistent performance. Confidence that the business isn’t dependent upon one individual.

Even something as difficult to measure as organizational culture contributes to that confidence. I’ll spend more time on that subject in a future article because I believe it’s one of the most overlooked drivers of long-term business value.

One point often surprises owners. Value isn’t created during negotiations. It’s created long before a buyer ever walks through the front door. The businesses that attract the strongest interest have usually spent years building capable leadership, establishing effective processes and systems, and creating an organization that buyers believe can continue to succeed after the ownership changes.

Those things reduce uncertainty.

And when uncertainty goes down, value generally goes up.

Whether you’re thinking about transitioning your business next year or simply beginning to consider your long-term options, it’s worth stepping back and asking yourself one important question:

If I were the buyer, would I be confident buying my own business?

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Next in this series: Why businesses that depend too heavily on the owner often become the hardest businesses to sell—and one of the biggest obstacles to maximizing value.

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