First up Facebook did not fail it just corrected.
Mark Zuckerberg lost about $12 billion of his current net worth of $77 billion which is not loose change but don’t feel sorry for the guy as he falls away from the big guys.
Facebook has seen a big rise in recent times and dropping $120 Billion still has it well above say March trading and a tad over $500 billion as we speak.
Original trading started at about $80 ( may 2012) billion but dropped to $69 billion within the first couple of weeks so this is not unusual
Why the drop.
Who can really tell about market concerns but the reported views on privacy issues certainly are having an impact.
These issues may be blown up, fake or real but sentiment and emotion drive a market.
So how does this affect you?
Every business is vulnerable to the loss of value almost overnight.
You have a great corner store with excellent passing traffic and then roadwork’s bypass you and store traffic and your net worth dies.
Perhaps you have a great little hardware store and a super chain opens up in the main street.
or maybe you sell a brand of clothing on line and it goes out of fashion because of a reported happening or event.
The list of events is long.
In these days of Internet it is even more frightening. A couple of bad reviews on a web site can drive traffic away regardless of the truth or integrity behind the review.
The value of any business is generally the income it generates times a market variable, multiple.
So you drop your profit you drop your value.
Say a business has a great turnover say $1 million a year and nets say $250,000. The business is worth between the $250 k and a four times multiplier say 2.5 as an average therefore a value of $625 k
The business then loses its biggest customer that contributes 20% of income that then drops the value using the same formula to $500k overnight. It happens believe me as a I talk from experience.
So even your business is vulnerable to a Facebook like drop but what can you do about it?
Some things are out of your control and the only way out is to work a contingency plan.
Take control early
If you lost one big customer can you find 10 little ones to replace them? Can you improve your buying margins to keep the profit up. Certainly adjust your cost base by eliminating some labour cost to help ease the pain.
Business is an ongoing battle but the golden rule is to plan to sell when you start, work those issues that add value to the business,
Not only profit also include image, Brand, control and efficiency to maximize your value, Facebook has gone up by seven times the original price in six years not a bad dip in value.
In conclusion, my site New Business on line includes many articles to help the business owner succeed in this brave world of business.
Peter Hanley
