This week in Built to Sell News, we’re covering:
- Why the values of Tesla and LVMH are moving in opposite directions
- A magic dial for controlling your future
- Selling a service business without an earn-out (listen now)
- How to get a premium valuation for your business
- The ultimate deal killer (listen now)
- How to lose $800 million in one day
📈 Why The Values of Tesla and LVMH are Moving in Opposite Directions
Last week Tesla announced they were cutting prices on their vehicles and the stock tanked by 10%. LVMH, the owners of premium brands like TAG Heuer and Fendi, saw their market capitalization go the other way. The maker of fancy watches and handbags saw their market capitalization eclipse $500 billion for the first time, while France reported that 3 of 4 of their most valuable companies are luxury brands.
✨ A Magic Dial for Controlling the Future
Investors and acquirers see growing margin as a sign you are increasing your point of differentiation in the market. The more unique your offering, the more pricing authority you have. When you have more demand than supply, you can easily dial up or down revenue with subtle movements in price. Keen to hit a revenue target next month? You can subtly move prices down and hit your target. On track to surpass your targets? Shift prices up a little to enhance your luxury positioning and deepen your competitive moat.
This flexibility effectively serves as a magic dial that allows businesses to control their future. Investors and acquirers value certainty, and since companies with pricing authority possess a significant amount of it, they are rewarded with higher valuations.
💎 How to Get a Premium Valuation For Your Business
Speaking of commanding a premium valuation, acquirers pay more for “turnkey” businesses. One of the ways to ensure you get top dollar for your company in the future is to document your processes now. That’s why we created VidGuide, the world’s best way to create Standard Operating Procedures for your employees to follow when you’re not around. Get a free, 7-day trial now.
☠️ The Ultimate Deal Killer
This week John interviewed Brandon Lazar, whose story includes a cautionary tale. Lazar entered into a negotiation to sell his business without a firm timeline and ended up living to regret it.
While Lazar was able to pick up the pieces and successfully sell his home service business without an earn-out, the key lesson should be noted: time kills deals. The longer you let a negotiation to sell your business drag on, the less likely it is to close.
📉 How to Lose $800 Million in One Day
If your business becomes too dependent on a single employee, expect to take a valuation hit from potential acquirers. Just ask Rupert Murdoch, whose Fox Corporation lost $800 million in market capitalization when it announced the departure of Tucker Carlson. Love Tucker or hate him, there is no denying the impact losing a key employee had on the value of Fox.
📽️ Clip-of-the-Week
In this clip, Lazar reveals how the lack of firm timelines during the acquisition process led to the failure of his first deal.
🏆 The Trophy: How to Commemorate Your Win
After selling A+ Gutter & Window Cleaning, Brandon Lazar built himself a state-of-the-art home gym in his garage as well as a home entertainment room for his family to enjoy. You can hear him talk about it at the 32:24 mark of the episode.
📣 Quote of the Week
” If I were to do it again, I would insist on tighter timeframes and push to get a small portion of the purchase price released from the trust”.
– Brandon Lazar shares how he would have approached the sale of his business if he had a mulligan.
📈 Recent Deals
- IMG, the training academy that minted Andre Agassi, Boris Becker, Jim Courier, Maria Sharapova, and Venus and Serena Williams, has been acquired for $1.25 billion
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