Twitter Envy

You’ve seen it before. For years you’ve nurtured your private company, watched it struggle and, if you’re talented enough and hardworking enough (and a little lucky), succeed. Then you see these overnight upstarts that seem to just take over the world. Think about Google. Or, more recently, Facebook or Twitter.

Robert Scoble’s blog speculates that Twitter “actually worth five to 10 billion dollars.”

No doubt you know of examples from within your industry.

It’s enough to give a small-business owner Twitter Envy.

But for every dot-com boom there are hundreds of busts – remember the spectacular dot-com collapse of 10 years ago?  Of course the lingering effects of this Great Recession are still fresh in our minds.

This speculation of mind-numbing “market value” numbers brings a point for you, the small-business owner. By all means, you want to put a dollar value on your business, but there’s a right way to do that and you want to be careful not to get too caught up in speculation. After all, nobody knows if Twitter is actually making any money at this point (it almost certainly is not – yet).

I’m inclined to agree with this comment on The Industry Standard by Fred Wilson: “On one hand, I think the transparency into the world of private investments is good. Entrepreneurs benefit from having their companies discussed and valued in ‘the market.’

“But I think all the focus on what a company is worth can be bad. These companies are private for a reason. Most of them aren’t mature enough to be public companies. They often don’t have full management teams and some don’t even have revenues. The focus inside these companies needs to be on building the company, the product, and the business. And endless discussions about what their company is worth can be terribly distracting.

“I saw this in action back in the late ’90s when a bunch of our portfolio companies went public before they were ready. The employees spent too much time focused on the stock price and too little time focused on the business. Many employees starting counting their net worth in stock that was not liquid and eventually was worth pennies on the dollar of what they thought it was worth.”

Chances are your company will never go public. So dreams of exploding like Twitter or any Wall Street IPO will remain just dreams. But as you contemplate plans for the future such as selling your company, you need to have an idea of what your company is actually worth. Which brings us to my book, How to Sell Your Privately Owned Company, Baby Boomer’s Edition.

Chapter 3 – Putting a Price Tag on Your Business – offers a comprehensive guide to setting the right price for your business, a price that will be fair to you and attractive to potential buyers.

Eric R. Voth has been a successful business owner and seller since the 1970s. Among other enterprises, he is currently owner of ERV Productions Inc., and author of How to Sell Your Privately Owned Company.