Did you know that it’s entirely possible to build a company that is incredibly valuable to you as the owner but that no one wants to buy? True.
Imagine for a minute that you run a thriving aerospace manufacturing plant that throws off a few million a year in earnings – and has for the last decade. Sounds great, right? What if that same company has only one customer? I ran into a version of this company recently – the owner lived a lavish lifestyle, employees were happy, and their single customer seemed pretty pleased with their performance. The only problem? No one is buying that company – at least not without a massive discount on the price.
We call this concept of how the market looks at an asset – Market Attractiveness. Attractiveness encompasses many factors – margins, overreliance on an owner, single points of failure such as customer concentration, and many others.
Value Scout starts to quantify these issues when we run the Market Attractiveness Indicator, giving you a road map for building a company that is not just profitable to you as the owner but Attractive (read: higher valued) for potential buyers.