Why everyone in your team needs digital skills. There is no doubt that we live…
Why Your Business Website Matters for Your Retirement
I have just done a small experiment for myself. I googled ‘Small Business Advice’. My search returned 80 300 000 results.
As I suspected, by far the majority of those results featured articles on how to start and/or grow a business, but there was precious little on how to make a graceful and profitable exit. The first five pages of my Google search yielded no results at all about business exits. Most business owners don’t even consider their exit strategy until either the time is upon them to move on, or some combination of circumstances means they have to sell the business as a distressed vendor.
An entrepreneur I follow closely, Geoff Green, is an expert in this space and he certainly has the runs on the board. We have been following his advice as best we can so that we will be prepared once the time to exit comes around.
However, I came across some research recently about a new factor that affects the value of a business that I had not previously considered; online presence and quality of online interaction. In this social media age, we know that if you aren’t online, you don’t exist. Again, you can easily turn to Google and find multiple studies of buyer behaviour. The results will vary slightly, but they will all tell you that buyers are checking you out and researching your products and services online.
I also know that big companies report that one of the main reasons they don’t engage small companies as suppliers is that they simply can’t find them. Without a website and a professional email address, a small company is all but invisible.
It really isn’t a surprise then, that having a healthy digital footprint has now become a key metric in assessing the value of a business. The research I encountered was from an Australian company, JPAbusiness, who reported that not only is a healthy online presence important, but that they have quantified just how much it can be worth.
In their case study of a business with $20m turnover, JPAbusiness estimated that having a weak online presence reduced the business value by 0.5X earnings (in this case Business Maintainable Earnings).
What’s the payoff from a healthy online presence?
What does 0.5X earnings actually mean in real dollars? When a business is valued in preparation for a business exit, the value is usually calculated as:
Yearly earnings X ‘multiple’
The size of the ‘multiple’ depends on a multitude of factors. Examples of these factors are:
This is by no means an exhaustive list, but we now need to add ‘Health of online presence’.
Let’s say your Small Business is currently producing reliable earnings of $500 000 per annum. If you were offered 1.5X earnings by a potential buyer, you would pocket $750 000 for your retirement or next business venture. If, by virtue of your amazing digital footprint, customer interactions online and Google ranking (amongst other things), your buyer was prepared to offer 2X earnings, your payout increases to $1 000 000. I’m sure that any Small Business owner would be happy to have an extra $250 000 for their retirement.
I have written previously about the importance of having a credible digital footprint. I also know that this is an area of business management that many Small Business owners really struggle with. It’s hard enough running a business without having to learn ‘all that digital stuff’ as well. And then there’s the cost. Having a professional website built and maintained can be a significant investment for a Small Business, $5000 to $10 000 for a custom website is typical.
But this research shows that the return on investment of a professional website and a quality contact list can be overwhelmingly positive. $10 000 for a website or $250 000 for your retirement, which would you prefer?
I think I’ll go and update my website …
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
SHARE THIS ARTICLE WITH LIKE MINDED SMALL BUSINESS PEOPLE