The concept of something being “worthless” is an extreme. That argument will be made regularly in contexts like divorces or disputes with the tax authorities around capital gains tax, in both cases for obvious reasons. But when it comes to a negotiation with a third-party buyer, suddenly a “worthless” business that “cannot be sold” transforms from a caterpillar into a butterfly.

Or at least, an attempt at a butterfly.

Humans are self-interested creatures, so they will inevitably negotiate to try and get the best position for themselves. This is why an objective view on these things is so important, free from the emotions and biases that can turn a rational negotiation into a hot mess.

So, it isn’t worthless then?

It’s absolutely true that if a business has not been prepared adequately for sale, the value is lower than it should be. This is why we work with entrepreneurs to help them get the right steps in place to ease the sales process. Importantly though, we don’t buy the story that a business is worthless simply because a sales process might be difficult, or too hard to achieve right now.

The value creation journey starts right from the very beginning of a business journey. Value is created as that first idea germinates. The idea gets tested and refined over time, or “pivoted” as they like to call it in the business books, thereby creating more value. Websites are built, products are advertised and revenue is banked (hopefully).

Worthless? No. The process of human creativity and resilience isn’t worthless.

The reality is that as long as a company can generate cash flows or at least has some prospect of generating cash flows, there is value there. Whether or not it gets anywhere close to the founder’s expectations is a different story. Due to the ride-or-die approach that an entrepreneur has to take to be successful, there is substantial bias and usually too much optimism when a founder is asked about the value of the business.

Like we said, an objective view is important. For example, if a business generates an inadequate return on its assets, then the value may well be less than what was invested into the business. Still, it’s not worthless.

Worth less than expectations perhaps, but not worthless

We don’t like to use the word “worthless” lightly, as sitting behind every business is a founder’s hopes and aspirations, along with late nights and sacrifices. This is why we are dedicated to helping entrepreneurs understand the drivers of value, along with what might be holding them back from unlocking that value one day.

A business doesn’t magically wake up one day worth a fortune and ready to be sold. Value creation happens along the way to that outcome, with key milestones that need to be achieved. Our role is to help you figure out where you are on that journey.

Let’s talk

We are waiting for you here.

Get investor ready

bizval