All of you are familiar how a duplex could be leveraged to a 4plex using it’s equity. What about a business? And what about leveraging internal process and intellectual capital (intangible value pillars and drivers) for more value and equity instead of other.
Let’s look at an internal leveraging example first. A Business Owner invests in new sales tactics $10,000 to increase sales. It worked. $250,000 in gross sales was added to revenue with 6% net profit. So, lets say he added $15,000 to the bottom line. Now, what if the Owner invested $10,000 into an earnings move to leverage intangible value pillars and drivers. The move went something like: increasing price 3%, margin 3% and decreasing advertising 3% resulting in sane revenue as above yet, this new earnings move had a 15% gain of net profit, and over $112,500 to business value. We work with more complicated internal leveraging moves with proprietary software tools. But, it is obvious, but which move you would take?
Now, from the bigger picture of a buy-out or merger. There are a lot of reasons someone might sell a business or buy another one. However, the leveraging model is similar. Since, “leveraging is the fastest way to wealth”, by Warren Buffet why not use it with your business? Contact a Business Value Specialist for a spreadsheet of the leveraging model. They will explain it and give you examples and how you could use it to gain wealth. Contact us for a complimentary review of your situation.