There are many different ways of gauging the price of a business for sale. Some of the more common include valuing the business based on profits, cash flow, assets or sector. But how do you ascribe a value to intangible assets such as customer goodwill, corporate culture, staff relationships, and brand, which are crucial ingredients in the lasting success of any business?

While it is difficult to attach numbers to exactly how much these intangibles impact the bottom line, the evidence that they do can be seen in the fact that all too many businesses, once sold, fail to live up to the performance expectations anticipated prior to the sale. For this reason, many purchasers insist on the owner and other key staff staying on for anywhere from one to three years after the sale.

It can also – as in the case of a colleague of mine with a very successful consulting business – be what limits you from selling your business at all. Despite annual revenues of $1 million, he discovered that his clients were resistant to working with anyone but him as he began exploring selling his business to an associate.

The bottom line is that, whether or not you ever intend to sell your company, understanding and maximizing intangible assets is critical to building a business that is not dependent upon you or any other specific individual in it – the mark of a truly successful business.

An example of this are two good friends of mine, Lawrence and Lori-Ann Keenan, who run a very successful ESL school here in Vancouver. They began the business as a couple, doing almost all of the work – from teaching the classes to marketing the school and everything in between – themselves. After just 10 years, she now works only one day a week, and his involvement with the business is negligible, save for focusing on investing their profits.

What has allowed them to have such freedom is that they have created and continue to refine written systems for everything they do. The importance of creating systems is understood by most business owners, but generally they focus on creating bare-bones systems that reflect simply the “how to” rather than the “how we do it here.” What sets my friends’ business apart and allows their success to continue to grow despite less and less involvement from them are the systems they have developed for instilling a distinct culture and personality into the school.

The school is very much centred around Lori-Ann’s personality. Like her, it is high-energy and fun with a no-nonsense professionalism and a passion for excellence in customer service. An example of one of the systems that sustains this is a weekly high-energy graduation ceremony at which all students are present. This event involves plenty of clapping, singing and general fanfare. Back in the staff room there may be some rolling eyes in the anticipation of this weekly ritual, but once staff step into the limelight to play their part in the celebration, they find it hard not to be caught up in the simplicity and energy of the familiar routine.

Companies like Google have systematized a culture of innovation by requiring employees to spend 20 percent of their time on side projects not related to their daily work. West Jet systematizes fun with their pre-landing jokes – no matter how corny they may be. Nordstrom has systematized customer service excellence through rigorous and ongoing training programs on empowerment and customer service excellence. Southwest Airlines systematizes its culture by training all of its staff in “Living the Southwest Way,” by practicing the three characteristics of having a Warrior Spirit, a Servant’s Heart and a Fun-LUVing Attitude.

All of these are examples of how to build those intangibles into the core operating systems, principles and standards of your business. Not only will these types of systems make your business more attractive to potential buyers in the long run, they will make it more attractive to those employees who are best equipped to deliver on your brand promise, thus attracting and keeping loyal customers. Ultimately these intangibles are not only what drives a strong bottom line, but sustains it over the long term. They are, at the end of the day, where the true value of a business lies and what helps any business owner to realize the full value of the business they have built – whether they sell it or not.

-Andrea Jacques aka. Kyoseigirl

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