Do you know how much your business is worth? You deserve to know your business’s value throughout its entire lifecycle, not just when you go to exit.
In this episode of The Agent of Wealth Podcast, Marc Bautis speaks with guest Jason Early, chief revenue officer at BizEquity, about the advantages of knowing your business’s value and how to overcome barriers to getting a valuation done.
In this episode, you will learn:
- How and why BizEquity came about
- What the purpose of a business valuation is
- The benefits of having a business valuation completed
- How to overcome the fear of getting a business valuation done
- And more!
Tune in today and learn about the benefits of getting a business valuation!
Marc: Today we have Jason Early on the show. Jason is the Chief Revenue Officer at BizEquity. BizEquity is a company I’ve recently partnered with to offer business valuations to my business clients that I work with. Welcome the the show Jason.
Jason: Thanks for having me.
Marc: If you could start off with a little bit of your background, how you got to BizEquity and how BizEquity got started.
Jason: I’ve been with Biz equity about 18 months but have known the company for a lot longer. The founder and CEO of BizEquity is a guy by the name of Mike Carter and I’ve known Mike for about ten years and he started the company seven and a half eight years ago. The first three three and a half years we’re building the technology and the algorithm for our platform. I came out of the financial services space. I spent eight years or so with a boutique advisory firm by the name of Creative Financial group here in Philadelphia and then spent three years with a relatively innovative kind of training and consulting firm to the financial services space called Hoopis. About 18 months ago when I joined biz equity the timing was just right. Mike and the team had really started to explode as they started to scale the business and packaging and delivering it through those that serve the business owner: financial advisors, bankers, and accountants. It’s been it’s been a great journey and we’re having an awful lot of fun.
Marc: Bizequity seems pretty straightforward. Is it somewhere someone can go to to get a valuation on a business that either they have or they’re looking to buy?
The BizEquity Platform
Jason: Yeah there are several parts to the platform. It is an online, cloud based valuation platform. Our mission at biz equity is to democratize business valuation knowledge for the business owner.
When you think about valuation done traditionally and why so few businesses actually know their value it’s because valuation again done traditionally is a pain
- It is offline.
- It is very expensive.
- It takes an awfully long time.
- It is highly intrusive.
The value prop just isn’t there and so our platform makes it faster, easier, and cheaper quite frankly and we put it in the hands of those that already serve the business owner and that’s exactly right we have a cloud based valuation platform that our subscribers can white label. They can deliver valuations in real time to their business owner clients and we pair that with a prospecting and engagement tool as well where our subscribers can go in and dynamically search for business owners that they are looking to engage with.
Marc: I think the fact that you could get a valuation done cheaper, faster, and easier was what was most appealing to me as a subscriber to the tool and someone who works with a lot of business owners.
I’ll put a financial plan together with my business owner clients and a majority of them have no idea what their business is worth to the point where they don’t even want to include it in the plan.
Just like every business starts at some point at some point everyone is going to have some kind of either exit strategy. Succession planning so it inherently will be part of the plan.
Jason: They don’t know what the actual true value of the business is. It’s what we’ve said for a long time, which is how can you as a business owner do anything be it a succession plan, an estate plan, a financial plan, know that you’re properly diversified in your portfolio , or ensure that you’re properly funded. How can you do any of those things if you don’t know the value?
Nine times out of 10 the business is the largest asset for the owner and so we know that the statistics are such that only 2 percent of a privately held business know the value themselves. And that was a problem for us. And so all the way back to its founding that’s what biz equity set out to solve. We we believe as a company that business owners deserve to know their value. And to your point not just at exit because everybody is going to exit their business one way or another. It’s throughout the entire lifecycle of your business. We don’t want you to have the value your business just when there is a triggering event but every decision you make as a business owner has an impact on the value of your business. We think there ought to be an easy way to track and understand that value and that’s what we set out to do.
Marc: So it’s not just let’s value our business one time and we’re done. It’s more of an exercise that can be done just as if you’re tracking you know networth or cash flow. It’s something that the business owner can track over time?
Jason: That’s exactly right and it dramatically affects your plans right. The value of your business certainly changes and that can change your entire financial plan. 78% percent of business owners say that they’re going to fund their retirement through the sale of their business. So when you think about that 78% say they’re going to fund the retirement through the sale of their business but only 2% of businesses know what they’re worth. That’s insane. Having an understanding of that value affects everything in your financial life. Have you protected the value of that business? For your business partners, for your employees and most importantly for your family. Have you thought about what that transition plan looks like and most have not. They are worried about their business and whether or not they’re making payroll or all the things that keep them up at night.
I mean nine times out of 10. Right. That’s all about their business. People don’t wake up in the morning thinking about their estate plan or their risk management or their investment portfolio. Business owners specifically are thinking about their business. BizEquity believes very strongly that their business is certainly their most important asset. How do you not know and understand and track the value of that asset.
Marc: I guess it is. You mentioned but some of the reasons why someone doesn’t have a business valuation. There’s the cost aspect of it, but also it’s not easy to figure out where to go to get one. Another reason is that an owner may actually be afraid of finding out what their what their valuation is. Are there any other reasons that you can think of why a business owner wouldn’t get one done?
Jason: I think your first point is spot on in that they don’t always know where to go and very typically they’ll go to their most trusted adviser. A lot of times for the business owner that is their accountant. They will ask their accountant for a business valuation and their accountant may or may not provide that as a service. The ones that do have to charge an awful lot because it takes a lot of hours to dig in and value a business. It’s not a great business model for either side. if I’m an accounting firm and business valuations are part of our practice I need somebody that’s an expert. So for that we have to charge an awful lot. It becomes very difficult for them to scale and they have to go to the business owner and tell them that the valuation is going cost $7,500 at a minimum. And the business owner decides not to do it. The value prop isn’t there for the business owner and so the accountant ends up ballparking the valuation at a couple of times earnings or revenue based on their industry. They do this back of the napkin valuation and they go from there. At BizEquity we saw that as a problem. Business owners deserve to know exactly what their business is worth and how can we create a value prop that allows them to find that out and understand that valuation and track it in real time.
Public companies right have long been afforded the ability to understand their value. We have markets that value their business and people that track their business on a on a daily basis. The 1 percent of privately held companies that have access to that capital or investment bankers have a pretty good understanding of what their business is worth because they’re being told and evaluated almost daily as well. The 99% of businesses out there, the main Street businesses that really fuel our economy aren’t afforded that value.
How the BizEquity Platform Works
Marc: How does the platform work? How does someone a business owner get a valuation? What data do they need? Is it all online that they that they’re generating this valuation from.
Jason: We are a subscription based service where we sell our platform or license our platform to to those that are already serving the business owner. Many advisors will license our platform and they’ll deliver it on their own white label. If I now have access to the biz equity platform I can take my white label and I can go through it several ways
- I could send the business owner a secure smart link directly from our platform
- the business owner could input the data right and then in turn we would generate the report and go meet with the business owner on it.
- I could sit live in my office or theirs and walk through the platform
It’s very interactive and end user friendly. As the advisor I could walk through the seven steps with the business owner. We have kind of a turbo tax like number that’s going to change dynamically as you input information. You are going to see that business value change. Once you input all of the data you can generate that report. If you have all of the information in front of you in about 10 or 15 minutes you can generate a really robust twenty nine page business valuation report. That report is going to go through four different conclusions of value on the business.
- A financial summary.
- It’s going to go through a dozen or so different KPI or key performance indicators that we kind of call McKinsey for Main Street. So you can benchmark these business owners against their industry peers and and how they’re doing in different areas of their business and so again. As a subscriber to BizEquity you are delivering a ton of value to this business owner because for the first time they now understand the value of their business and they see how they’re stacking up against their industry peers. It’s really valuable data for them to see and understand what levers they can push and pull to drive more value in their business.
Marc: I think a couple of points that you made are that this can be done in 15-20 minutes. It’s not something that’s going to take the owner hours and hours to input data into.
One of the things that I am asked when demonstrating the BizEquity valuation is will it actually take the specific industry into account. Is the engine is smart enough to know that different industries are valued at different ways?
Jason: Absolutely. This is to our founding teams credit. In the business valuation space you can’t be half right. Our chief valuation officer is a guy by the name of Scott Gabehart and Scott built our algorithm. Scott remains with us today and he’s done more than 5000 off line valuations in his career. He has testified for the SBA and the IRS numerous times and literally wrote the business valuation book. Scott is an expert on valuing main street businesses and he built our algorithm to cover over 900 different industries. Industry is very important from a from a valuation standpoint. Our platform uses more data than arguably anybody in terms of things like transaction history and market comp data, All of that feeds our algorithm which then values the businesses in in real time. You’ll just start typing in be it a dentist, a manufacturing firm, a landscaper, or a management consulting firm we’re going to serve up the proper industry code for you.
How Your CPA Or Advisor Can Help With Your Valuation
Marc: Does the owner have the ability to actually allow their CPA or advisor access to enter that info on their behalf.
Jason: We tried to build it right so that every use case is covered. You can send that smart link to the business owner may have a couple of pieces of information about be able to get started with the valuation. They start plugging away and maybe they get stuck because they don’t have some of the financials handy. They can save it for later after they dig up the financials, but they can also always delegate. They could click the delegate button and forward that link effectively to my CFO, Controller, accountant, or whoever they wanted to. That would send a secure smart link to that third party who could then upload the information on the owners behalf.
Marc: The simplicity of doing these is great. I have helped owners do a bunch of valuations recently. It is super easy to line up tax return data into the fields on the BizEquity form.
Jason: We appreciate that. When the team was building the platform there is obviously a lot of complex things going on behind the scenes in coming up with the valuation. The team wanted the user interface and the user experience to be very simple. I’m not an engineer so I can say that I think it is beautifully simplistic and it is very easy to pull somebody through the seven steps. Even if you don’t know anything about business valuations you can still pull somebody through the seven steps because our online help system will drive it. If I’m looking at the financial inputs that need to go in and I’m asking for officer compensation as an example. As the user I can hover over officer compensation and it will tell me exactly what that means by definition and exactly where you can find it on the tax form.
Marc: We are talking a lot about business owners using this tool, but I actually ran one of these last week for someone who was looking at purchasing a business. So the use case is not just business owners but it can also be used for someone who is thinking about buying a business and who wants to help generate an offering price or compare it to the listing price of the business for sale.
Jason: There’s certainly no shortage of use cases for the platform and we have people that certainly are thinking about exiting their business. They can use this to gain an understanding of what they may want to go to market for. Certainly on the buy side as well. There are an awful lot of different use cases. And people ask us all the time what is the most common use case. For us it doesn’t matter meaning whether you’re doing it for financial planning purposes, gifting, estate planning, tax planning, or you may be selling or buying the business.
We believe that business owners deserve to know the value of their business. It’s our mission to democratize that knowledge and create a value prop for the marketplace that’s better than four to six weeks and $7,500 at a minimum. I don’t say that as a knock to those that provide business valuation services today because again I don’t think the value prop is there for them either. It’s not a scalable business the way that it is today. We have people that are in the business valuation space using our platform to scale their practice. Right now I can do valuations faster with less time invested and I can still charge for it. I have a more robust report that I can deliver in a much quicker timeframe and don’t have to charge as much.
Marc: Going back to the actual valuation report that is produced when an owner goes through the seven steps. I know the owner is probably most concerned about seeing that valuation number that BizEquity produces. You mentioned some of the KPI’s that are on the report. Are they able to use the KPI’s to see or compare against other businesses in their industry?
Jason: Yes. So the report includes several things. In addition to the four different values on the business it will include a financial summary containing 12 different key performance indicators that can be used to benchmark their business against industry peers. Then on the dashboard we’re also going to stack rank the business both locally and nationally against their industry peers. So I may be the fifth most valuable dentist in Berwyn Pa. But I may be the you know 3800 most valuable dentist out of half a million across the country or whatever the case might be so.
Marc: Once the report is generated what’s next. Is it something that they should do once a year, every couple of years, once a month. How often do you see people actually updating their valuation?
Jason: We certainly believe that the business owners at a very minimum ought to know the value of their business on an annual basis. Some advisors who are updating future plans more frequently than that may do it more frequently. There may be different things throughout the course of a year that a business owner may want to spot check and understand what their value is worth it. But I would say most businesses are certainly doing an update at least annually.
Marc: Thank you Jason. I think we’re just about out of time. For any business owner who wants to get a valuation I offer a free valuation service. You just have to go to my website bautisfinancial.com/business valuation and you can go through this exact process that Jason went over today.
Jason if someone wants to connect with you or learn more about you in BizEquity where can they reach you?
If you just go to www.bizequity.com all the information is there you can certainly email me direct at j[email protected]
Aric: Jason this is fantastic, thank you for being here.
Jason: I appreciate it. Absolutely. It was my pleasure.
Aric: Thank you all for listening to the Agent of Wealth podcast with Marc Bautis. If you have not subscribed to the podcast yet please click the Subscribe now button below. This way when Marc comes out with a new podcast it’ll show up directly on your listening device. This makes it much easier to share this podcast with your friends and family. Again thank you for listening today for everyone at Bautis Financial this is Aric Johnson reminding you to live your best day everyday. And we’ll see you next time.