This post is about one of my 45-second pitches at my BNI Chapter, BNI City Business. You can read the introduction to this collection here.

One of my favourites from Bizarro. I have used this numerous times in presentations, and was a perfect fit with my message this week (June 2, 2023).

The primary focus was around business valuation: What is the most important data point in valuing a business? A deliberate setup. In most cases, the answer is along the lines of ‘past financial performance.’ This is because business owners focus so much on what has happened, not what will happen. Or needs to happen. Or even what can happen. We get locked into P/E Ratios – Price to Earnings ratios (or multipliers) based on what we did last year to give us a sense of business value. This is the method most commonly used by business brokers.

This method can give you a guide, but it is not how a business is actually valued. What is someone buying when they acquire your business? Certainly not your previous cash flow. They are buying the future cashflows – and the earnings that result. The value of your business is the Net Present Value of those future earnings.

So, the most important data point in valuing your business is sustainable future profits. This needs to be your focus when planning your business exit. The rest is just noise.