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You as the founder you had a great idea, built a team, obtained a patent, and have been growing the company for the past 4 years. Now you have decided it is time to exit. How do you determine the value of your company?

Simply, the value of the company is what someone will pay for it in today’s market. How do you determine that value? There are all kinds of methods to determine its value. Without getting into a lot of specifics, the capital structure (debt and equity), assets, current and future cash flow and market share define the value of your company. But is it that simple?

Switch your perspective. What would you be looking for if you were purchasing your company? Examining your company as a potential buyer what makes it valuable?

Most potential buyers are looking for a turnkey operation. If it is a merger and acquisition, the purchaser wants the company to be a profitable entity quickly. Let’s take a look at two assets that affect a company’s valuation, a patent and the leadership.

D’vorah Graeser of KISSPatent in a blog post on valuation discusses how patents are an intangible asset that increases a startup’s valuation, by potentially $1 million. Nice. Another intangible asset is the leadership team of your company. What impact does the leadership of your company with you and without you have on valuation? Some considerations follow.

How does the leadership of your company impact investors such as venture capitalists (VC’s) at the different stages of funding your company’s growth? At the early stages investors commonly see small leadership teams led primarily by the founder.

In the latter funding stages, consider the message sent to the investors if there is close to sole reliance on the founder(s) for success? Investors are working to manage their risk. A robust leadership team capable of growing the company as you gain access to more partners and bigger players, reduces risk. A savvy leadership team is required to navigate the inevitable challenges growth brings a company.

What about a potential merger and acquisition by buyers/investors looking to acquire the technology offered with your patent? What is more attractive? A team heavily reliant on the founder(s) or a well-developed leadership team supporting the founder. The latter presents a range of options; a rapid exit by the founder, operating as a subsidiary, or growth opportunities for the leadership team. All potentially increasing the value of the company.

The leadership of your company though not tangible is an asset, just as a patent. It adds significantly to a company’s valuation, particularly as you gain the attention of others in the market space. Develop and use the leadership capability of your company to reduce risk, create options, and increase your valuation.