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Page 172 GO IT ALONE!
In our extraordinarily competitive world, the unfortunate reality is that businesses may not have the same value to buyers as they once did. In the past, it was safe to assume that if a business generated a certain return in one year, then (with good management) a similar return was likely the next year. Today, there is the real possibility that without constant reinvention a business will slip dramatically in its returns from one year to the next. A buyer today is purchasing a platform that must be constantly revitalized, instead of a sure thing.
THE “MULTIPLE STREAMS OF INCOME” TEST One recurring theme in this book is limiting your risk as much as possible. A classic method of limiting risk is diversification. In the context of business income, this refers to the potential of the business to generate revenues from multiple sources. An example of a two-revenue-stream business is the cable television industry. Cable operators derive revenue both from subscribers and from advertisers. The benefits? First, the asset is working harder by generating dollars in multiple ways. Second, if one revenue area declines, the other may not, so the total revenue stream is partially protected through diversification. The ability to generate multiple streams of income is certainly not a prerequisite for a particular go-it-alone effort to be considered a good opportunity. Rather, it is another factor that adds to a venture’s potential value. The classic books on achieving multiple revenue sources are Robert Allen’s Multiple Streams of Income and Multiple Streams of Internet Income .
THE “VULNERABILITY” TEST The vulnerability test, or “what is the worst-case approach” to analyzing a business opportunity, starts with a few appropriate questions:
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GO IT ALONE! Copyright 2004 by Bruce Judson. Reprinted by permission of HarperCollins Publishers. All rights reserved.
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