Ready AIM Fire
Whether you are planning to start a business, are recently underway, or are growing your business, it makes sense to aim at what you are shooting for.
We’ll make use of the capitalized word, AIM. It isn’t something that was missed by our awesome copy editor – it’s something we want you to remember.
Remember AIM. Remember to AIM!
What are you shooting for?
Recently, it seems we have been having a lot of discussions with business owners that are looking to buy or sell a business.
Whatever side of the equation you are on, it is important to be familiar with AIM.
Before we dive in, you may want to also consider some companion articles:
Whatever the case, know and understand AIM.
AIM!
AIM is just another acronym that I think you should remember: A stands for Assets. I stands for Income. M stands for Market.
At some point, if you plan to buy or sell a business, AIM will need to be addressed. AIM covers the three major measurements that a certified or an accredited business adviser will use to value a business.
- Assets. What are the assets of the business worth?
- Income. How much income does the business generate?
- Market. What are similar businesses being sold for?
Ready AIM Fire!
Assets
For the purpose of making this article as relevant as possible, we will focus on the income component. So, we’ll only discuss assets briefly. Some businesses are asset-laden (e.g., a machinery shop that produces tangible widgets). And, others are not (e.g., an Internet company). Of course, there are intangible assets – like trademarks and such. But, to keep it simple, we won’t spend much time discussing the asset measurement. If you have assets, they do have worth.
Income
We will discuss this in more detail below.
Market
The market approach is a comparative analysis of what similar companies have sold for – adjusting, of course, for various factors that increase or decrease the value of the underlying business being considered. One such factor, as an example, is described in an article titled Major Customers and Accounts Receivable. Whereas you can’t directly control the market, you can control the factors that impact your comparison to the market. And, having a well-diversified customer base is important.
Income – the middle of AIM!
This is where we would like to develop some thoughts for you to consider. As discussed above, your business is either asset-laden, or it isn’t. And, you can’t directly control the market, so to speak.
But, God willing, you can influence how much income your business generates. And it is here where would like our clients to be ready, take aim, and fire.
AIM for Income
Simply put, a great business is one that flat-out makes money. Starting or growing a business that makes a steady bottom line income is the goal. Of course, there are intangible factors that are more important (e.g., providing great service, craftsmanship, workmanship, etc.). And, we don’t minimize these. In fact, these should be primary pursuits. You can read about this in the article called The Paradigm of Pursuit.
However, to be an ongoing concern, your business or organization has to make money. You have to make a profit. And, as bad as capitalism is made out to be, it is very relevant if you want to continue in business. We have joked about re-labeling profit as “continuance.”
Whatever your politics or preferences, God willing, at then end of the proverbial day, the value of your business or organization is heavily influenced by the presence or absence of recurring revenue and resultant income. You can call it income. Or, you can call it cash flow. You can call it EBITDA (Earnings Before Interest Taxes Depreciation and Amoritization). Or, you can call it SDE (Sellers Discretionary Earnings).
But, as the old jest suggests, “Just don’t call me late for dinner,” you will also be “late for dinner” if your business or organization doesn’t produce income. So, take the time to aim at what you are shooting for.
Summary
There are a bazillion moving parts to any business. And besides having some primary pursuits of paramount importance, your business or organization should make income.
At Blue Elevator™, God willing, our aim is to help our Member clients scale – to develop passive and recurring income. And we do this by helping them Innovate, Accelerate, Replicate™.
Contact us if you would like the same. Ready AIM fire!
MAR
About the Author:
Ken Moll is the Principal and Founder of Blue Elevator®. With professional experience spanning four decades, Ken has a breadth of foundational business knowledge rarely found – making him part of an elite class of professionals. Ken's passion is helping clients of Blue Elevator® get their “business to the next level™.”