I'm going to talk to you about 10 things you can do to increase the value of your business.
But before I do that, let me kind of put things in perspective so you kind of have an idea
why this mindset of value, profit, conversations you always hear about.
So many people run a business and by the time the year end comes with taxes, any profit
that the company makes, they like to take it out, pay taxes on it, and put it in their
own checking account, right?
Because it's my profit, it's my business, it's my this, it's my that.
And then there are those that say, man, this is what I need to live off of, but let's let
it ride.
Let it ride.
Let's grow it.
Let's let it ride.
Let's invest.
Let's let it ride.
What is the difference between the two and why does some do one over the other?
Here's the difference.
Profit, value.
Short term, long term.
Working in the business to make money now, working on the business to increase value
later.
Now, later.
Instant gratification, delayed gratification.
More like a sales mentality [profit], more like a CEO mentality [value].
Independent contractor mentality [profit], business owner mentality [value].
So this is something you see a lot in business.
So you may be wondering yourself and say, "Pat, I get it, but I want to increase the
value of my business.
What should I do to increase the value of my business?"
I got ten keys for you.
#1, if the business is based on a technology that you own that a person, a company may
have interest in wanting to buy your company, that that technology can be used in their
entire spectrum of business that they're doing, that increases the value of the business,
especially if you own the technology.
If your business is ran on technology and systems and CRMs and back office, all these
things that make things go faster, where, you know, you'll typically need 200 employees
to do this, but because you have the technology you only need 45 employees to do this, people
who want to buy a company like that and that increases the value of the company.
#2, focus.
Your focus into what you're doing, there was once a book written I read I think it's called
Built to Sell, Built to Sell is a book, a phenomenal book, I think every entrepreneur
running a business ought to read the book Built to Sell because what the book tells
you is not to focus on selling your business.
Focus on getting focused with your business.
So what is the product?
What do you do?
Hey, I'm trying to do this.
I'm trying to do this.
We do this, we do this.
So many different things that you do where to increase the value of your business, why
don't you focus on one, two or three things that you do, but increase your attention on
those things.
It increases the value of your business.
I understand how sometimes it can be tempting to say, but Pat, if we do more, the value
goes higher.
It does not.
The more focused you are, the more you increase the value of your business.
#3, a business that's ran on systems, not just you, increases value.
If I can come into your company and I walk through, and I say, What did she just say
on the phone call right now?
Oh, she said this, this, this, this.
Do you have it on a sheet of paper?
Uh, no, we just taught her.
What if a new person comes in.
How do they learn?
Oh, they just sit right next to her.
Is that typed out?
No.
That's systems.
You don't have it.
You need to.
. . okay, we'll type it out.
If I come in and you have a new employee, what are the steps when a new employee comes
in?
Step number one, two, three, four, five, six.
You don't have that?
You need that.
It the person buys this product, what's their next step?
What do you do next?
What do you do follow up?
We don't have that.
We don't have that written out.
These are systems and procedures.
Businesses are built on systems.
Grow more value because it's got a life of its own without the human being.
Now obviously, you need a driver, but the system takes your business value to a whole
different level.
#4, Strategic partners.
What are we talking about with strategic partners?
Look, strategic partners not only validate the business, they increase the value of the
business.
They have good things to say about you, and when it comes down to it, they can bring complete
different aspects to your business that you may not have yourself.
So I think strategic partners play a very big role in increasing the value of your business.
#5 is recurring revenue.
Ask yourself with the business you have right now, what part of it recurring?
What do you make every single month in your business whether you make a single sale or
not?
Recurring revenue produces the highest multiples that if somebody buys this book it's got the
highest multiples.
Next, is supporting cast.
Operations and supporting cast.
Who is around you?
Who's running the company?
This is the part where somebody who's driven on profits, they don't invest in the people.
So the value doesn't increase.
I remember many years ago I was running a sales office, and there were these two guys
who were my competitors.
And I'll never forget a call I had.
It was within a week apart with each one of them.
And we were doing a cruise contest, something like that I was running for a sales contest.
And they both had bigger distribution lists than I did.
I had a smaller one.
But by the time it was done, they only had six people or four people they wanted to pay
to go to cruise because it was going to cost them $600 or $800 and they said, no, I'm not
going to pay for them because of . . .
I said, man, you've got to invest into your people.
So what I did is I went and paid into it for 43 people, them and their spouse.
And we went on the cruise.
Those guys had two.
This guy had three.
We had 43 people there.
Okay, investing into the people.
The level of loyalty we got from them who were willing to come back and wanted to learn
more, improve more, better the company more, was a lot higher.
That's investing into a supporting cast that wants to be in the company.
So the more you invest into your supporting cast to help them get better, they're more
indebted to you, they're more loyal to you, they'll stay with you longer, and the value
of the company goes higher the better supporting cast you have.
By the way, this also goes with your executive team, who you bring onboard as an executive
team, your sales force, every single thing that is part of the supporting cast to growing
the business.
#7, data.
Sometimes you see companies that buy another company and they cut a big billion dollar
check and you say, that company's revenue was only $50 million a year.
Why did they cut a check like that?
Because they have access to a lot of data that they need.
So if you have data, data increases value of a business.
What type of data are you gathering yourself and how big is it, how wide is it, how deep
is it that another person, another company can say, this is valuable and it increases
the value of your business.
#8, EBITDA vs. need.
Let me explain what EBITDA vs. need is.
EBITDA stands for Earnings Before Income, Taxation, Depreciation, and Amortization.
That's what EBITDA stands for, right?
So a lot of times you'll hear a company say, well, why would we buy your company because
your EBITDA is so low and you know, if we do the multiples based on your EBITDA, yes,
your top-line revenue was XYZ, but your EBITDA is so small, you know, why would we do that?
Because you're solving for EBITDA.
I'm not solving for EBITDA, I'm solving for value.
You're solving for profit.
If I solve for profit, I stay flat.
Because I solve for value, I've grown quarter after quarter after quarter after quarter
as a business because I'm solving for value.
So, the more you focus on a need, meaning, going to your industry, whatever business
you're in, and find a need that exists that no one's focused on.
For us, there's a need that we have.
Increase the need, where if somebody has an interest in your business one day, it won't
be based on the EBITDA.
It will be because this need will fill another void that they have that the profits here
will go up to the roof because they locked in a need here.
Two businesses, this one [need] increases a side that's about distribution this side
increases the profits.
This profit that they make here is well worth them paying for the company, the value of
the company because you're solving for a need, not just for EBITDA, although you still need
to have profits, no company that goes out of business, your company's worth nothing.
You do need to have a focus here [EBITDA], but not to the point where it's only short-term
instead of long-term.
Next, subscribership and distribution.
What is that?
That's an audience, you know, when you see a company like Instagram being bought, but
they don't know how to make money, why are they buying them?
It's because they have an audience.
There's a distribution.
So always focus on what you can do to increase the distribution of your business, your company,
the eyeballs.
The amount of people that are seeing it.
The subscribership, the customer base.
It has something to do with recurring revenue, but it doesn't.
There's somebody that's constantly coming to you that's logging on to your website.
Like, you know, a Huffington Post has subscribership that people are coming to it and email subscribership,
anything that's listening to something that you're offering that increases the value.
And last but not least, stay hands on to increase the value of your business.
I think a lot of times people take their hands off the business too early and they become
CEOs too early instead of becoming you know, somebody that's a businessman that at the
end of the day your job is to increase the value of the company and if you do a good
job increasing the value of the company, you're a CEO.
You're a great CEO.
But don't take your hands off too early.
A stay hands on CEO or executive or entrepreneur knows about what's going on with technology.
Knows about how focused the product is and if we're getting distracted.
Knows about the system, is hands on with the strategic partners because he makes the calls.
Is hands on with the recurring revenue.
Is hands on supporting cast, is hands on with the data that's being gathered, is hands on
with the need and the EBITDA and is paying attention.
Is hands on in increasing distribution and subscribership.
Always stay hands on to increase the value of your business.
With that being said, Luis, throw me a pillow right there because your buddies are not here
today.
Because we got a flight.
I've got to get on a flight to New York and Madrid here and I got a few meetings in New
York before going to Madrid.
Anyways, so, this is a topic that I went in and tried to do in a few minutes because I
have a conference call here myself to do.
But if you've got questions about it, comment on the bottom about how to increase your value
of your business.
This is a topic that is extremely important for you to pay attention to.
If you watched it once, watch it again, take notes, print out what we have, re-read it,
and find ways on what you're doing yourself for your business to increase the value of
your business.
And if you have not subscribed to our channel yet, if you haven't subscribed to Valuetainment
yet, please do so.
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[breaking glass sound] You completely missed it, Luis.
Click right next to it to be part of the notification squad, the alert, click on that as well.
And with that being said, have a good one everybody.
Take care.