Your business. What’s it worth and why?

Having seen several sides of business I once wrote a guide on selecting business. Although it was left as a draft. I may release it one day.

One point I made: of around 10 separate tests, Porters Force Business Analysis (standard MBA stuff) and the infamous SWOT Analysis (Strengths. Weaknesses. Opportunities. Threats) are both alive and well, and one of the tests used to analyse business should be this.

1. Barriers to entry in the business (Low  is bad) - (High is good)
2. Barriers to exit from the business (High is bad) – (Low is good)
3. The power of the supplier (High is bad) – (Low is good)
4. The power of the customer (High is bad) – (Low is good)

Taking them in turn for the health care sector

Healthcare. Barriers to entry in the business

• Question: What stops anyone setting up competitively to you in your marketplace?
• Healthcare answer: It is almost impossible to set up in the healthcare industry without considerable knowledge
• Comparison example: If you were selling printer cartridges or mowing lawns – anyone can source and sell the products involved and easily learn the methodology

Healthcare. Barriers to exit

• Question: How hard is it to get out when you want to or need to?
• Healthcare answer: Easy because once you are in the business; you are where many people want to be.
• Comparison example: If you were selling printer cartridges of mowing lawns – anyone can source and the product and use the methodology. Why would they want to buy your business?

Healthcare. Supplier and Customer Power

• Question: Can your supplier control your business?
• Healthcare answer: No. Healthcare consist and clients and a candidates; both are qualified and and unavailable to people and businesses that are not equally qualified.
• Comparison example: If you were selling printer cartridges of mowing lawns – customer and supplier are both in control dictating everything to you. With a commodity product most people will buy the cheapest consistent with adequate service and performance. And even when you are in business if the new kid on the block undercuts you then you will be expected to follow. So in a commodity market in where price is the key factor the customer has power. If the customer has power  you must be able to be flexible in deals. Having supplier and customer power against you , is a fatal combination.

Healthcare. Conclusion
Using Porters Force Model healthcare wins because.

• The intellectual levels of entry are high.
• The margins are high.
• The value of the business is high.

Using SWOT healthcare wins because:

• Strengths.
  It is not easy to get in to the sector because both of the high compliance and qualification requirements.
• Weaknesses.
  Healthcare is not an easy business to access and impossible without help.
• Opportunities.
  The predicted growth of sector is very high indeed.
• Threats.
  Funding enough cash flow to cope with startling growth could be a challenge.

Business should be about at least two of these three but business is really great if it delivers all three

• Salary
• Dividend
• Exit

Read everything involving the baby boom.