Dave Lakhani knows the value of value. Beginning at age 13 with the proceeds of an insurance settlement, the now-32-year-old Boise, Idaho, entrepreneur has started or invested in and eventually sold eight different businesses. They ranged from a security company to a pawn shop and from start-ups to established firms, but all had one thing in common: They were worth more when he left them than when he started.
"Establishing value in your business allows you to make sure that the thing you've worked on most of your life continues to pay you," explains Lakhani, currently the owner of consulting firm Direct Hit Marketing. Building value also allows him to sell at a profit when his skills and the needs of a changing business no longer match, or when he just feels the urge to move on.
Unfortunately, few entrepreneurs take the same attitude, according to Don Taylor, chairman of TD Inc., the Newport Beach, California, franchisor of VR Business Brokers, a national network of business brokers. "They don't care," says Taylor, "because they [figure] they're not going to sell it anyway."
But value can be valuable even when you're not selling your business. Being able to place a high valuation on a business may be critical to success when an entrepreneur is obtaining financing, negotiating with a potential partner or strategic ally, hiring a key employee, setting up an employee stock ownership plan or at myriad other points in the life of a business.
"As much as we believe we're going to be doing this for the rest of our natural lives, eventually we wake up and realize there's more to life than our business," says Lakhani. "Or we come to a state in life where our business outgrows us, and it's time to get someone else who has the vision to carry on. Or it's just time to retire."