Episode 45: Building Up Your Business Valuation (With JC Maldonado)

Episode 45 May 23, 2022 00:36:54
Episode 45: Building Up Your Business Valuation (With JC Maldonado)
The Quit Getting Screwed Construction Podcast
Episode 45: Building Up Your Business Valuation (With JC Maldonado)

Show Notes

It's our last episode of the season! We're skipping out on a lien episode to bring back J.C. Maldonado from BizGro Partners and dive into some exciting new content on growing a business, and building its value with the intent to sell it. Your business is an investment- why not build it to pay for itself in the long run? J.C. has all the tools, tips, and tricks you need to know to start building the value of a business NOW and prepare for a successful sale down the road. And if you're looking to buy, this is a great resource to know what to look for in a sound investment. 

Like this episode is you learn something new, and be sure to rate us wherever you get your podcasts! Happy listening, and we'll see you in Season 2!
Find JC's Services Here: https://bizgropartners.com/

Connect with J.C.:https://www.linkedin.com/in/jcmaldonado3

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Episode Transcript

Speaker 1 00:00:11 This is Carolyn ING. Welcome to the quick getting screwed podcast, where we talk about everything related to contractors, the construction and information to help you run better businesses. Speaker 1 00:00:25 Hey guys, and welcome back to the quick getting screwed podcast, where we talk all about the ways not to get screwed in the construction industry. And today I have back with me, uh, JC Malto to talk about business valuations and all things business related as it comes to it from, you know, acquiring business as assets and, and you know, all of the stuff that business owners can do with their business and, and be, and sell their business. And so today I wanted to jump into specifically business valuations as like from a business owner perspective kind of things we could do to work on it, or what, what are people, if we wanted to sell our business, what things should we be working on? Hey, JC, welcome back to the show. How are you, Speaker 2 00:01:07 How are you doing? Speaker 1 00:01:08 I'm doing good. So as a business owner who may be interested in selling their business, what could, what could we be doing to work on our valuation and, and making our business look more, you know, purchasable, I guess. Speaker 2 00:01:25 Well, when you think about business valuation, I think one of the first things that a, a business owner has to kind of make the determination is what exactly are you selling, right? What is it that you're selling when you sell a business? What is, what value is the buyer receiving? So, um, one of the most important things to consider is, um, to understand that, um, your business is a, has separate value from you as an individual. So there's you as the business owner, the executive running the company, and then there's the, um, the business itself. And what you have to contemplate as a business owner is that when you sell the business to the extent that you're connected to the day to day operation, all that really means that when you sell the business, you have to come along with the deal. Because if you're, you are the one running your business day to day, and the business is kind of interconnected with your executive capability, it's kind of connected to your management skill. Speaker 2 00:02:31 Then, then the question becomes, well, then what is the buyer buying? If they have to replace you, that's never gonna be an easy thing once you leave the businesses value now is, you know, um, somewhat astonished. So, um, so I think business valuation has to be looked upon two in two different ways, right? One is, um, well, one, one thing that drives value is the actual net earnings of the business, right? Which means, you know, there's an income stream that the business produces. That's essentially what the buyer is buying. And the second part of it is kinda like the management of this income stream, like, and to the extent that that management is transferable and the income is transferable, that's what kind of drives business valuation. And if the business owner is kind of caught up in the day to day management, when the business gets sold, the owner should expect that he should come with the deal, meaning it's going to probably be a long transition period before the seller could actually exile. Speaker 1 00:03:41 Gotcha. So in your, so there's two things. The, the first thing you said was the net income, which brings up some of my questions or business owners may have, you know, a lot of when you're running a small business, a lot of what you do is planning. So you don't have to pay taxes. And that means I don't want a big bottom line. Um, because if I show a big net profit, then that's something I have to pay taxes on. So there are things that I do within inside the company to spend money on company assets or things like that that are improving the business, but don't improve the bottom line. What, how does that affect it? How can you overcome that? Speaker 2 00:04:21 Well, when you sell the business, it's typically gonna be, it's gonna sell for multiple of some sort of earnings in subspecialty construction. A typical multiple would be between three and four times, uh, adjusted net earnings. So this would be, and net earnings is just a fancy term of saying profit, but to determine real profit, you would take, you know, your revenues minus your expenses, you know, um, let's just say on a tax return or financial statement, and then you're gonna add back depreciation. You're gonna add back amortization. You're gonna add back interest. If you have debt on the business, that's gonna be retired at the closing. And then you'd add back all, all the officer compensation. Okay. And then you have to deduct the cost of management. In other words, what would it take to replace you as the CEO of the business? And that net number is pretty much is gonna be your net earnings. Speaker 2 00:05:13 And typically the business will sell for multiple of those net earnings. So for instance, my net earnings is 700,000. It might sell for 2.1 million, which is a three times a three multiple. If it's 500,000, it might sell for 1.5, if it's a million dollars, a million and a half dollars, it may sell for a higher multiple, it might sell for, you know, three, three and a half, four times that number, right. But the key for earnings is that has to be transparent. So in other words, if the buyer can't see the earnings and it's kinda, um, and there's too many and the books are not clean and it doesn't, it's not clear to the buyer where the money is being produced well, that's, that's gonna affect the amount of money that a buyer pays for the business. So, um, so earnings has to be transparent and has to be transferable. So to the extent that earnings is not transparent, then the buyer's only gonna pay for the earnings that he sees as opposed to, you know, earnings. You can't say Speaker 1 00:06:17 Well, I mean, I, no least, especially in the construction industry and a lot of other industries has been for the last several years, you get a hundred percent depreciation on, you know, big assets that you buy or over certain class, which are then, you know, deducted from your gross revenues. But if you're adding that back in, that's, that's a level of that would go straight to the bottom line is what you're telling me on the net Speaker 2 00:06:40 Income. Correct? Correct. So, so, so one thing to consider is the transparency or earnings will determine what a buyer page, usually the purchase price is, is, is determined by net earnings. Again, a fancy is it ever, they call it, they call it adjust, but, uh, net earnings, but it's all a fancy way of saying profit. Speaker 1 00:07:02 Gotcha. So it's never considered on the gross revenue. Speaker 2 00:07:06 No, not in construction, you know, uh, you, there are industries that where the revenues might drive value, but construction's not one of them. So, so that, so that's gonna determine the price. Um, another thing determines the price is that, um, there's a concept that, you know, uh, when I go and speak in front of groups, there's a concept called not all earnings is, is, uh, treated equal mm-hmm <affirmative> so not all earnings is equal. So to give you an example, there's, um, pretty much three types of revenue sources, right? And that's, and to the extent the business owner understands this, this, this could really help them understand what drives the value of the business. So there's project revenue, which is a lot of subspecialty construction is kind of built around project revenue, right? Typically they're either working with end users or, or general contractors and those general contractors kind of, you know, they, they engage in projects and then they subcontract the, uh, the sub-specialty construction businesses, you know, to supply labor and materials on a job or handle a specific trade on the job. Speaker 2 00:08:14 So, um, in those scenarios, that's considered project revenue because it's usually one time now those customers can potentially come back. And in that case, it's repeat work, but usually one time revenue that's associated with one time work is called project revenue. Gotcha. Then there's repeat business, repeat businesses when you have a customer and they on a periodic or predictable way come back to the business. So they'll buy from you and then they'll come back two weeks later and buy from you. Then they'll come back to you a month later and they'll buy from you. And they're just repeat customers, right? So think of a restaurant, right, where they have all these consumers and then some, you know, the consumers that are happy with that restaurant come back, right? And to the extent that the restaurant is tracking these customers, then they can determine who's a repeat customer as opposed to a one time customer. Speaker 2 00:09:07 So a lot of project revenue is based on one time customers or they're dealing with customers are not necessarily predictable. Whereas repeat project work is coming from customers that are coming back. So that's the second form of income income that derives from repeat customs. And then the third type of, of income is what we call recurring revenue. So that's typically, there's either a contract, either verbal or, or written down that where a, uh, a customer agrees to come back to the business and pay for those products or services on a contracted agreed upon basis. And to the extent that a customer does that, that kind of creates predictable revenue. And we call it recurring revenue because it's, it's ongoing. It could be predicted, it's transparent and a business can kind of, you know, project its growth patterns or, or could determine what level of debt service this income could, you know, could, could cover. Speaker 2 00:10:06 Um, and, and, and it's normally looked upon favorably from buyers who are trying to, uh, buy companies where the risk is reasonable and the, the risk can be calculated. So those three types of revenues, either, you know, project revenue, repeat business, or, um, recurring revenue, right? Those three different revenue streams are looked upon differently from buyers. So buyers will typically pay more for a business that produces a lot of recurring revenue, right? Whereas they'll pay less for buyer that, that businesses that produce a lot of project revenue, right? So this is an important distinction in sub social de construction, because most of the revenue is project based. Mm-hmm <affirmative>. Now you can make the case that if you have some GCs, you have good relationships with GCs, and they're coming back to the well, and you get to bid on a lot of their work that, that maybe be, may be a source of repeat business, but all the work is bided, and it's not done on a volunteer ter it's not done on a voluntary basis, so to speak. So it's still kind of project revenue. So subspecialty construction is typically built around project revenue. Therefore it usually trades for the least amount, the, the, the, the, a lesser of a multiple than if it was a business that was kind of built around recurring revenue. Now, there are also, Speaker 1 00:11:24 If you had a service based company that did service contracts, that'd be more valuable to somebody that was looking to Speaker 2 00:11:30 Buy, particularly if the retention rate was high. Gotcha. So if you have a service company, so, and, and there are a lot of subspecialty construction companies that, um, kinda have the potential to develop a recurring revenue model. So I'll give you an example, an elevator installer could also come up with maintenance contracts, a service, and then make ongoing revenue. A commercial landscaping construction company could come up with a maintenance program where they do the, you know, the pruning, the edging, the mowing, you know, and, and have contracts in addition to, um, project work that they might do for end users of GCs, uh, and HVAC company can come up with a service department and, and then kind of solve service contracts to, to those, uh, you also pool industry, right? The pool construction company could have a service repair. So a lot of the construction businesses actually have opportunities to create some sort of complimentary service. Speaker 2 00:12:27 A painting company could have a cleaning service that they could, you know, uh, that's recurring in nature and it's, uh, you know, and kind of provide that service. So, so understand no matter what business you're in, you could probably create some level of a recurring revenue model. Um, look, even outside the world of construction, an accounting firm, which is namely project based, they make money, what through audits, and they make money through tax returns, preparation, and then they, they, they make money to maybe be bought in for, uh, due diligence on an M and a transaction, a business acquisition, or maybe they're involved with the real estate transactions where they're being bought in, but whatever it is real, um, they make money with, you know, audits stuff. But if they wanted create a recurring revenue model, well, they can, they may develop a bookkeeping service where now you have all these clients out, you know, outsourcing bookkeeping to them and they could provide the labor and, uh, and the expertise, uh, on the bookkeeping side. Speaker 2 00:13:23 And then bookkeeping would actually represent a better business because it it's a recurring revenue model, even though it doesn't require the same expertise as typical accounting functions. So any most businesses you could, if you really think hard and think it through have potential recurring revenue models that could be implemented into it. And what's important is that this is creates a better cash flow, but it also makes the company more valuable. So, so, so not all earnings are equal. So earnings must be transparent and then understand that depending on the kind of earnings that you have, that will drive the purchase price of the business. And usually the purchase price is determined by a multiple earnings. Gotcha. So there's a concept in my talks where I point out not all earnings are equal. Speaker 1 00:14:10 I think that, I think that's a great point. Let me ask you another question as a business owner, or I've heard that some business owners may not use all business money for business expenses, um, and they may have like might use 'em for personal expenses, which obviously would affect the bottom line. Is that accounted for at all? Speaker 2 00:14:30 Um, that may not hurt as much if it's accounted for and could be proven out. So for instance, if I take a, a, you know, a $50,000 vacation, a two week vacation to some island somewhere, and the cost of it was 50 grand and it's in my books and you know, that it may be in the tax return financial statements, it gets kind of written off as travel, right? Cause we're taking advantage of the tax laws in a due diligence scenario. If you can show me a receipt or you proof that it was a personal vacation, you know, then, then, then, then it, it may not have too much consequence. Um, now to the extent that your, your financials or your books and records are littered with this kind of stuff, mm-hmm, <affirmative>, um, I would recommend to an owner, who's looking at sales business to kind of clean up the books and try to, uh, keep those kinds of things separate. Speaker 1 00:15:20 And so like, if you, if you get in a position where you've been running it for a while and you wanna sell it, so some of the, the first thing you would work on, if you didn't already have, it was getting the book straight, Speaker 2 00:15:29 Getting the book straight is, is extremely important along with understanding, at least understanding realistically, what kind of earnings your business produces. Gotcha. And that'll help establish the right expectations. And if you're not ready to sell, then maybe you could establish the right plan going forward to increase the value of business. So, so one aspect that increases the value of business is just transparency and earnings and the type of earnings. Now, the second part that's important. That's equally important is what we call the transferability of those earnings. And then, and what we're asking and contemplating, this is, uh, to what extent can these earnings be transferred to a third party buyer in a fluid map? Um, so that, so now there are other aspects that could affect the transferability of these earnings. So one of them is, is having the business tied in having the business on a, tied into the management of the business. Speaker 2 00:16:22 That's actually a detriment, even if the business owner is competent, even though if they've been making millions of dollars, that's actually bad when it comes to going sell your business. So the best part is to have a business that's operated by a management team, separate from the owner, so that if I'm a buyer, I buy the business. I'm not, I'm getting the management team with the business, which means I'm getting the income stream, the income producing capability of the business. But I'm also getting built within the business, an ability to transfer that over to me as a buyer. If the owner is intertwined into the business, then that, that could be problematic. Now I have to make a deal that involves the owner, staying on board long term. And certainly even if I do that, I'm not gonna be motivated to pay a premium for that because I'm, in essence, I'm taking a risk. Speaker 2 00:17:11 So transferability, and there are other transferability factors that you have to consider as well. Um, for instance, concentration in any one area is never a good thing. So if you have too much of your revenue with one customer, too much revenue, uh, established by one salesperson, too much revenue as a result of one or two supplier relationships, all right, you, you, you, you have concentration. And of course the owner being involved in the management is a management concentration. So there's management concentration, there's custom concentration, there's salesperson, concentration, there's supplier concentration, all concentration issues. Um, basically preclude the owner. Who's looking to sell their business from transferring over the business to the other side in a fluid manner. All those could have impact. So for instance, if you have customer concentration issues, let's just say you have 40% of your revenue with one customer. Now I go by the business and then a year later that one customer leaves, well, that is a risk. Speaker 2 00:18:12 That's pretty significant. And that's going to make me as a buyer, pay less for the business or not wanna buy the business at all. So these concentration issues really do affect the total value of the business, or more importantly, they may affect the terms of the deal. So, which means, okay, you're making a million dollars a year, I'll pay three and a half million dollars for it, but because you have one customer that makes up 40% of the revenue, I might make a part of the purchase price contingent on the retention of that customer over a long period of time, you know, or I might make a part of the purchase price based on what we call an earn out, which is a part of the purchase price is contingent on certain things happening in the future, particularly performance, revenue, profit, et cetera. So, um, to the extent that, you know, if I do that as a buyer, but what the seller is ultimately doing is taking and sharing in the risks. Speaker 2 00:19:09 So the more Goodwill transferability issues there are, the more risk the seller has to take when you go and sell the business in order to make the business itself viable and sellable. Uh, because if I don't do that, then, um, then chances are the business will never sell. Remember, um, I don't know if you know the statistic, um, only 20 businesses in the market, but 20% of the whole businesses in, um, in the business for sale market actually sell really, so has an 80% failure rate really meaning it never sells. Uh, so 80% of all businesses in the, in the, for sale market never sell. And that statistic has been around for a long time, really. Speaker 1 00:19:48 So that means Speaker 2 00:19:50 Despite all the information that's out there about exit plans and, and, and business valuation and all the, the, the, the new internet age where there's, it's ton of information that's out there, this type of stuff, the statistics have not changed. Um, only 20% actually, uh, us 20% of all business owners would look to sell the business, actually complete the transaction. Speaker 1 00:20:12 So another question that I have is, um, when you acquire a business, um, if they have like back office operations, like invoicing, all and all that stuff that you already have established, do you keep their back office, or do you use your own back office? I'm Speaker 2 00:20:28 Just, well, it really depends on who the buyer is. If, if I'm a buyer, let's just say, I'm in the space. Mm-hmm <affirmative> and I have a team then I, I might make an acquisition. And, and if there's an unnecessary expense that we can cut, we'll do it. Obviously, that just makes good business sense. Um, for the most part, as a buyer of trying to keep the glue together, the foundation together, and kind of go through a one year learning period before I make any major decisions with the business. Um, and that one year learning period isn't is really important. Um, going forward, especially if you wanna develop a plan to grow the business. One of the biggest mistakes that inquiries make is that they, they make changes too fast, too quickly, once they buy a business. Gotcha. Speaker 1 00:21:13 And so a couple questions then, do you help people get their business in a place that it's ready to sell? And then on the other side, too, if somebody's gonna buy a business, do you help them run it after they first acquire it? Speaker 2 00:21:26 Well, I'm not a service provider, I'm a buyer. Okay. So when I buy businesses, I'm buying the business for it to have an, to be an asset, our portfolio, we have 22 companies under management, so I'm not a, um, I don't, I mean, I may meet an owner and if he doesn't wanna sell or, you know, we're talking about valuation and, and there's a disconnect and I might educate him or her with regard to some of the things that constitute value and hopefully, Speaker 1 00:21:56 Sorry. Speaker 2 00:21:57 Yeah. And hopefully the seller could take it serious and, you know, seriously enough that maybe that could spark, uh, um, the foundation of making a deal with him, but mm-hmm, <affirmative> out worse. At least he has information that I've shared with. Yeah. But remember it's earnings and it's transferability of those earnings. Those are that, that's the two things that dry value, you know? Uh, Speaker 1 00:22:19 So, um, based on your personal experience, have you tell me, like your favorite, the favorite business you bought, or your favorite sale transaction? I'm kind of curious as a buyer, what you're looking for. Speaker 2 00:22:33 Well, we've, we've bought some good businesses over the year. Most of the businesses that I buy make between a million to 3 million in net earnings, right. That fancy way of saying profit. Right. Gotcha. Um, revenues can range between three and 30 million, but I'm focused on the one to $3 million kind of space in terms of net earnings. I'm typically buying the purchase prices of my deals between three and 10 million. So that that's the size deals that I do. Um, and these are high performance, small companies, and, and we're looking to transform these businesses into bonified, middle market operations. Um, but in doing so, most of the owners are running the business day to day of, of the ones that I bought. So my transactions usually include the owners, making a long term commitment. Uh, well, they make a short term commitment to run the company day to day for at least one year. And then they make a longer term commitment to kind of be on the board of directors and have a, and retain a, you know, a stake in the business as we grow. So it's important to me to keep the founder around. Now I can put a lot of cash in their pocket and I can certainly, um, uh, get them to the board level where they can enjoy, you know, kinda enjoy and, and be a part of the strategic development of the business. Um, so usually those are the you types of deals I go after. Speaker 1 00:23:51 Gotcha. And how have I'm, I'm just curious, how is that from having dealt with these business owners? How does this transform their lives? I mean, is it, it sounds like a dream, like to go from managing the day to day to go to just on the board being strategic. What have, what have you seen? Speaker 2 00:24:07 Well, there's a couple of things that would stop an owner from doing the type of transaction on proposal. One, an owner who is looking just for the most money. Um, usually doesn't work with me. I, I would say I'm a mid-range bidder, you know, I'm a fair bid. Um, I'll pay a fair price for a very good business, but I'm not going to pay a premium nor will I low ball and, and come in with a wacky structure and, or, or try to get the seller to take more risk than they deserve to take. So I'm a very fair buyer looking to create a deal. That's good for everyone involved, including myself and a deal that's palatable to the seller on some level. So my, my type of deal, um, I want the owner to run the company for one year, and then after that one year, get outta the day to day and be a part of the board, be a part of the strategic development of the business, right? Speaker 2 00:24:57 And a lot of the owners, particularly most owners I'm buying from are between 50 and 70. And I would say more of them are between 50 and 60 than 60 to 70. And that seems to be an age where they're young enough to kind of have the ambition, to wanna see through a second phase of development of their business. But they're old enough to appreciate the fact that it is only so long. It could, you know, this business can grow there just one or two owners, cause there's only so much one or two people can do. So, um, the notion of being on a board, establishing a board of directors with my group and, and kind of having an ownership group and an executive management team and having those two separate having the management team run the day to day and have the ownership group involved in the in top line management support, capital support and strategic development support. Speaker 2 00:25:48 Having that intact is attractive to a lot of owners. But if you only care about money, then the problem is that you're only gonna sell that the highest bidder, the highest bidder has to justify the acquisition costs on some level, right? Cause they paid a premium and usually, uh, justification of, uh, acquisition costs is associated to what you do with the business afterwards. And normally the highest bidder will do one or two things. They're either going to make a lot of unnecessary changes and cut expenses that really shouldn't be cut because it dilutes the service offering of some level or the value proposition of that business, right. Or, or the quality of that business, whether it be employees, customers, et cetera, um, or they just simply, the buyers is a larger entity and they're just integrating the target to their entity. And the owner's legacy is pretty much gone. Speaker 2 00:26:39 No one will remember that this business was even owned by the owner and in, in the latter part, you know, if, if they're not able to successfully integrate it to something else and they just pay a premium for the sake of paying a premium, which is out there, the chances of the buyer failing go up dramatically. Yeah. So if the buyer fails, the owner's legacy is up in smoke. And if the buyer integrates their business with a larger entity, then the owner's identity and legacy also goes up to smoke. Yeah. So the owners who, uh, care more about their legacy, more about their people, more about the business, the future of the business, those are the usually types of the owners that do business with us. Whereas the owners who are just care about the money they're greedy, then they're probably not gonna do business with us, but I don't knock them for being greedy. Speaker 2 00:27:28 You know, if you're a business owner, you've, you took the risk, you built the business, you kind of deserve to be greedy if that's what you want. So it's either, you know, so if you were gonna be greedy, I'm fine with it. But, but what I will not allow an owner to do is BEUs meaning Don's not gonna get what he wants from a legacy standpoint, from the highest bidder. And that's like a real counterintuitive reality. It's very counterintuitive. Cuz usually when you sell something, the highest bidder is the best buy. Yeah. I value it the most, but in the business sale world, right in, in the world of business sale transactions, the highest bidder is usually not the best buy, you know, uh, they, they usually, and when an owner just goes to the highest bidder, they're basically saying that the money is the most important part, which is fine. Speaker 2 00:28:20 Like I said, but, um, just like very similar to being a service provider, right. I could provide a crappy service and charge you the lowest price or I can charge you the best service and charge you a lot of money. Right. But as a consumer, you have to determine, well, what do you want? You want the best service or do you want the best price? But if you actually think you're gonna get the best service and the best price, <laugh>, you're probably delusional as a consumer yet you have consumers that always bottom feeding for the lowest, but they have to sacrifice service. So, you know, there's a big difference between, you know, um, Faragamo and Payless shoes, right? There's a difference between Ruth Chris and McDonald's right. Same classes of products and services, right? Same, same, same classification of goods, but that the service around it is a lot higher for the Ruth Chris versus McDonald's right. Speaker 2 00:29:21 Or, or, or the service around Payless versus SCRO. Gummo right. You know, it it's totally different, but I would be delusional if I wanted Fe Gomo level shoe and, and try to get it for Payless price or, or if I wanted to, you know, pay for a steak dinner at Ruth Chris and pay the same amount I would pay for three big max that we done. Like it's just it's. So it's very similar. Um, the business sale world, the, the world of business sale transactions work very similarly that if I'm a seller, I can sell to the highest bidder. But if I care about my people, I care about my relatives. I care about the people who helped me become successful. I, if I wanted to retain their role and their position and give them opportunity, it's very difficult for me to do that. And I wanted to preserve my legacy and make sure that this business is actually successful once I even sell it or I sell a majority interest or whatever the transaction is. It's, it's hard. It's hard to do that and get the most money at the same time. Because again, the buyer coming in who pays the highest has to justify the acquisition cost and that's gonna cause them to, you know, pretty much change things around significantly. Speaker 1 00:30:35 All right. So what advice would you give to somebody that wants to sell their business? And they're, they're just starting to think about it. What's where should they start? Speaker 2 00:30:44 Well, I think the first step is to ask themselves, why are they looking to sell? Are they looking to sell and leave the business completely? Are they disgusted with the business or are they just simply tired of being the day to day being in the day to day or, and they're tired of having all the risk. And I think that's important if you are just, you want out, you want nothing to do with this business. You don't care what happens to the people you just want out. Then you have the right to one out. And then I think you should be looking to looking at the business and see what the driver values are. Again, the driver values are net earnings and the transferability of those earnings, right? Those are the two values. So if you have the business set up where a lot of earnings are being generated and you are not the one in the day to day, you have a team running the day to day. Speaker 2 00:31:36 I think moving in that direction will drive up the value of the business. Along with a consideration, in terms of what kind of earnings does the business produce? Is it project revenue? Is it repeat business or is it recurring revenue? Any business that's built around recurring revenue will sell for a higher multiple earnings businesses that are project based will sell for less. So understanding the reality of how this whole, this whole thing works, I think would be step one, step two is deciding, am I looking to leave the business or I look, or, or do I wanna preserve my legacy? Okay. If you wanna leave the business, then what you're saying is I want the money then set it up where you can get the money. But if preservation of your legacy is most important, then selling to the buyer who's you believe is gonna grow. Speaker 2 00:32:29 The company is gonna be more important than the money, the, and oftentimes the best buyer. Well, they're a mid-range bidder because they're not paying your premium for a reason, right? Because they're the best buyer. They're the ones who have the most business savvy. They're the ones who will bring the same level of fiscal responsibility that they're bringing to the transaction. They're gonna actually bring that to the business, right? If a buyer is fiscally irresponsible at the time of sale, then they're probably gonna be fiscally irresponsible. Post-closing which so, so, so the seller has to understand what do they want, do they want, they just want add a day to day. They just want out a day to day. Then most savvy buyers are gonna want strike some sort of long term relationship with you in order to, for the business to be preserved because a smart buyer knows that he's not gonna be able to build that business without the founder's participation on some level, both at the transition level. And post-transition, you know, so it's, it's both, whereas a a, not a buyer who's not as savvy or a buyer who's either arrogant or greedy is, is just gonna, they'll pay a premium without any of these considerations. And they will treat your business accordingly afterwards. Speaker 1 00:33:52 So tell me, how has it been with the businesses you've acquired? What kind of difference have you seen from the time you acquired it to later on? I mean, for the, for like net earnings, all the management how's that? Speaker 2 00:34:05 Well, our performance is our portfolio has performed really nicely over the years. Um, um, you have up and downs. We've never had a default on any of our loans. We've never had anything go outta business. So there's, there's, there's, you know, obviously we have a stellar record in that regard. Um, LA we have 22 companies last year. I think 13 of them had record years. Then we had maybe six, six of them just kind of hold their own. It was a tough environment last year, cuz as a supply chain, et cetera, still going through that. Uh, and then we had like a couple of businesses that went backwards a little bit and a couple of that have been hurting since COVID anyway, and those businesses are holding their own, but they went backwards. So it's like any portfolio businesses, you have your ups and you have your downs depending on, you know, what business and where we're at in the economic cycle. But I would say for the, for the most part, we've been very successful at taking businesses that are taking, are making a million to 3 million in income and, and, and, and building them up. Um, and then one way we do that is by retaining the founder founders strategic involvement, which is very critical. Speaker 1 00:35:10 Awesome. Well, people wanna find out more about you and your services, where would they look? Where can they find you? Speaker 2 00:35:15 Um, it's not a service. What, uh, one, if you're looking to sell your business and you'd like to just talk to us as a potential buyer, you, you could certainly reach out to me or if you're looking to grow your wealth or your business through acquisition, um, I have a platform that partners with entrepreneurs to buy companies. So if there's, so if you're looking to through acquisition or you're looking to just develop another income stream and you'd like, and you think buying a business could kind of get you there, we're a, a, a, a, a great platform. We're, we're pretty much a potential partner to, to do that with. So, um, so you could reach me at 7 1 8 6 29 8 3 4 9. That's a direct number to reach, or you could reach my, uh, you could email me J C Biro partners.com and you spell it. You spell [email protected] You me, you could, um, reach out to me and, and yeah. Schedule a meeting and Speaker 1 00:36:18 Perfect. And we'll put this all in the show note so that what show will be there again. I appreciate you being guested again. Thank you so much for being on the show. Speaker 2 00:36:25 Okay. Thank you. Thanks. Appreciate it. Bye. Speaker 1 00:36:33 Thank you for listening to this episode of quit getting screwed. I hope you found it helpful if you like what you hear, please like us and follow our podcast. If you want further information, you can find [email protected] We're also on Facebook, LinkedIn, and Instagram, and the book is available on, thank you.

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