Increasing Your Business' Value and Preparing to Exit with Kelvin Bell Episode - 521

You know, I happened to be there when Adobe announced their switch from purchases of— one-time purchases of their software to a subscription model where they're charging on a monthly basis. Boosted their profits immensely as a structure. I didn't have anything to do with that, but I did learn in the process something like that can be done and can be applied to individual companies.

Welcome to Streams to Impact, and be inspired to engage passionately in the work of your calling while achieving financial prosperity through multiple streams of high-yield returns on investment to bring your dream of making a meaningful impact to reality. I'm your host, Dr. Allen, and I am delighted that you are joining us today. If you haven't yet, get a complimentary copy of our exclusive guide, High Yield Investment Blueprint. Secure 18%+ returns in 60 days. Go to our website, highyieldblueprint.com. That is www.highyieldblueprint.com. Just provide your email address and we'll send you a copy today. Welcome to Streams to Impact. I'm your host, Dr. Allen, and as always, it is such a delight to have you with us, and we always appreciate our audience. So thank you for being with us. Today we have a very distinguished guest with us, and particularly if you're a business person, an entrepreneur, you are really going to enjoy today's show. Kelvin Bell is a distinguished Toastmaster investor and business strategist, and he empowers entrepreneurs with expertise in growth, exits, and M&A. And he is the author of The Top Value. He mentors business owners and helps them to thrive and to flourish. So Calvin, uh, your journey Much like Equus, has been one of transcending boundaries and inspiring others through your own work. So can you share with us that particular moment or experience that first sparked your passion and set you on the path to creating your own streams of impact in your life and how that affects the lives of others?

There are actually a couple of them. My father was involved with business as a Stanford graduate. A long time ago. And I watched him work on various projects and developments of companies. And then for me personally, I was involved in research and the opportunity to become the executive director for a community development organization in Durham, North Carolina. Unfortunately, I came in, I got back to my room from the finalist interviews, Top 3. I was told I finished number 2. And it's like, really? All this work, what do I do next? But I kept my head up. And about a week and a half later, I got a call from somebody who had either been in that meeting or was referred from that meeting to me, asked me if I would come down to the city, about an hour and a half, an hour and 15 minutes away, to take a look at a project down there, which was a construction project for a not-for-profit organization there. New subdivision development opportunity to build that out, and I was selected as the housing officer for that project, housing development.

Mm-hmm.

So that gave me an opportunity to work with them as a not-for-profit organization, help them grow skill sets that they didn't have And then work back and forth with them between the banks, the city council, town and the county council, and others to help get that project underway. So we ended up successfully getting that built out, 68 units of affordable housing, and which triggered a second flow, a second subdivision from there, which helped them continue to grow and develop. So from that, I've continued to help. companies grow, scale, and exit in different categories.

Well, Kelvin, thank you for sharing how it is that you got started here. You are an author of the book Top Value, which introduces strategies for increasing business valuation. So could you share a key takeaway that business owners can start implementing Today to enhance their company's worth.

Many times the companies are focused so much on their own internal growth or their service to the communities, but they don't take care of the business internally for the executives. So the owner or founder may not have set his sights on how do I get out of this. It's kind of, I can do this for people, I can do that for people, I can provide this service or this product. But they forget that they need to look also at the exit structure as well. And they frequently don't do that until later years or never get around to it. And the process is one where they overlook that opportunity. So stepping back from being the manager, the owner, the person in control on day-to-day operations, putting management team in place so they can continue that process is one of those key areas.

So if I understand you correctly, that if you're going to exit a company, you have to have a well-structured internal management team, and without that, you're not going to have anyone interested in actually coming in and taking over your business. Is, is that what I'm understanding here?

It doesn't even always have to be well structured. It just needs to be So that the person looking at coming into the business is not looking for a new J-O-B. They're not having to come in and run everything themselves. Put a manager in place and step back from that management structure. It's good to be off the management, the org chart, as an overall process, but that's not the entire sum of that. You still want to be involved in day-to-day to some degree.

Well, I can understand why That certainly would be challenging for— I mean, I can see it as a challenge for myself because, well, I'm not focused on exit. I'm focused upon execution at this point in time. And so I never think about that exit. It's what do I need to do today? What do I need to do tomorrow? Any suggestions for actually just changing that mindset from execution today to actually really looking down the path to maybe not even just exit, but really starting to do long-term planning?

There are a couple of parts to that. One is looking at the exit from the, the front side. So whether you plan for an exit now or looking possibility of exiting in the future. Start at least 1 to 3 years in advance of that timeframe for the best opportunities for growth and valuations. Then make sure the processes are in place so things are covered. You know, having a good set of books, having an organizational chart for leadership development from there, bringing on the skill sets, you know, and that part about having a good set of books cannot be understated. Overstated. It's awful understated because when they get ready to step out and look at the books, it's like, um, let's get an accountant to look at this again.

And then the accountant gets it and they throw up their arms and go, God, how did you operate?

They will do that. Yeah.

Yes. Well, in today's competitive market, growing sales is of course crucial. So what innovative approaches do you recommend for businesses looking to boost their sales figures, which I think all businesses are looking to do that, some more effectively than others. But so what are some innovative approaches to help us with that?

One of the things that's key That people don't look at is how do you get those valuations? Is the sales process up? Are you looking at your existing customers? A lot of times people are looking for new customers, which is a good thing. I don't want to steer them away from that. However, it takes 4 to 7 times as much effort to get a new customer as it does to retain an existing customer and keep them happy. So The opportunities to look at how do I keep the customers happy, how to retain them, how do I make sure that they have all the services they need, continue to deliver at that level, there's a great opportunity there. But on top of that, you're looking at subscription models, for example, where you have a monthly or annual recurring revenue stream, boosts the value of the company and adds to the profitability. Because again, you're still not having to go out and buy them a second time. Whether it's retainer-based services, subscription model, maintenance contracts, or other, it's adding that predictability to your operations is what helps boost that value. Yeah.

Well, profit margins are a significant concern and Like we just revealed earlier, accounting is not probably one of most entrepreneurs' first thoughts. And so these profit margins can be kind of elusive. So what strategies have you found that are most effective in increasing profits without compromising quality or customer satisfaction?

One of those areas would be to look at the pricing. Where are they right now in terms of whether it's a product or service, and look at where there are opportunities there. There usually are 2 sets of opportunities. One is we can come in— one of our things we do on our consults is to come in and look at companies where a million-dollar company can often save $100,000, maybe $200,000 by us coming in and looking at where they're making these expenditures. Which helps to boost their profit margins, obviously, their valuations, etc. The other thing is to look at, you know, the possibility of raising prices. Lots of times we find that companies have kept their prices at the same level. Could be 10, 15, 20 years they've kept the prices the same. Cost of goods have gone up, the cost of services have gone up, the cost of personnel has gone up, but they haven't ever adjusted their pricing. And it can be on small items or larger ones. So take a look at what is the difference in terms of how much can we move this, because every dollar they move is pure profit at that point if they're selling at the same price and will boost their profit margin overall.

Well, mergers and acquisitions have been a way to improve business circumstances. So whether that's buying to expand or selling to keep from closing down, these acquisitions, these mergers and acquisitions can be quite daunting. So what advice do you have for business owners who are considering this route to expand their businesses and to improve their businesses?

One, kind of take a look at what you're doing in terms of the merger. The front side of that is just look at how we can effectively engage in that process, understanding that we can basically double the size of your business overnight by doing a merger or an acquisition. And then looking, what are we acquiring for? We're looking to acquihire, basically acquiring a company to put in additional personnel or services or functionalities or capabilities and expanding that process. The other side is in terms of taking your time, again, looking at those books, making sure they're in order on your side as well as the company that you're looking to acquire, especially the company you're looking to acquire. You basically should know yours, but if you're looking to acquire another company, looking at theirs, because again, if they have not exercised due diligence in terms of how they've kept their books in an orderly fashion, You're stepping into a potential minefield. And then have them checked. The process of due diligence, whether it's legal due diligence, financial due diligence, operational due diligence, check to make sure that those things are covered and that the company is preferably operating at least above board and preferably in a good light in the community so that they're— you're not getting squeezed in that process. But you can make that acquisition function and double the size of your business virtually overnight.

Yeah, well, I could see how that could certainly work to double your business, but you're also in some respects you're doubling your headaches. You've got 2 sets of heads, the head of your company and then the head of the of the merging company. So you've got not only your own headaches but their headaches, and then you've got the aspect of determining how that relationship is going to work in that acquisition. How do 2 heads come together to actually essentially be one head? How does, how does all that occur?

One is to avoid buying the section head to come in just to operate the company. You can either have them continuing their role as a division, so to speak, so they can be a division head, or you take over the company and you're not having them continue on. Now it's good to have that expertise and have it available as instruction or insight, operational effectiveness, but you are taking over as the new entity, as a new head of control of that operation. So you can't have 2 heads trying to run that same thing and do it all the same way. One of the reasons for the acquisition, or the reason for them selling, is because they want to get out of the business. They want to retire. They're just overburdened. They want to spend some time with their family, or they want to do something else that's more fun. They might have a shiny object issue that they want to take a look at. One person we heard about wanted to buy a plane but couldn't do that and couldn't spend time learning how to fly while he ran the company. It's a good thing to step aside, have somebody else help you out on that and take over that operation. But it doesn't have to have a situation where there are 2 heads trying to run. You don't want a 2-headed monster in the process.

Yeah. Yeah, I could see how that could be quite the issue. But yeah, thanks for clarifying that. I hadn't really considered those 2 options, but they do sound pretty viable there. Tell us, Kelvin, about your consulting business and tell us a little bit about how it works. In particular, how do you integrate your half-day consults to deliver transformational value.

Well, thank you. One of the most fun things about what we do is to look at transformational value in the context of what people are trying to accomplish, whether it's sales, it's profits, it's mergers, and it's an exit process, you know, whatever they're trying to accomplish in those categories. And to have an opportunity to come in for an investment and look at that situation. We'd like to have a free consult first with topvalue15/call as an opportunity to sit down and for 15 to 30 minutes to talk about what they're trying to accomplish and how we might be able to help them. And once we get through that process, we can see whether or not we can provide value to them. And our objective is to provide value and transformation in the process. In the 4-hour concert— and it's actually a half-day concert, could be 2 to 4 hours in general. Some people feel like 4 is a little bit much. For us, it's kind of part of the process. We want to look deeply into where they are and what they're trying to accomplish and help align them to that. So in that situation where I was talking about being able to come in and look at an existing company and look at what their cost analysis are, we can find During that time frame, a lot of different ways that we can save them money or help them put in a program to make additional money. One of those things that we look at is like a value ladder. You know, many people are operating their companies with a certain small level of value items, and some have a huge range of things. Some, for them, we looked at what can we cut out that's not making profit? And the small ones, what can we add to provide an additional revenue stream? You know, I happened to be there when Adobe announced their switch from purchases of— one-time purchases of their software to a subscription model where they're charging on a monthly basis. Boosted their profits immensely as a structure. I didn't have anything to do with that. But I did learn in that process something like that can be done and can be applied to individual companies. So where they maybe offer a training program, you know, here's an opportunity to put it on a subscription model. They may be offering a product or service, they can put it on a box shipment so that every month they're having a new shipment coming in. And, you know, Amazon does that, we can do that, and other folks can do that. And sometimes they forget that that's an opportunity, or we can share, look, have you considered this? And this is another way to have a revenue stream that's predictable. And we're able to do that on those 4-hour consults.

Yeah, I've noticed a lot of retailers online are going to, at least offering subscriptions and Actually, I've subscribed to some of those because it just— it can be such a hassle going back into the site on a regular basis and reordering the same thing. You have to go to the site, you have to sign in, and now you almost invariably have a 2-level sign-in. So if you can get that subscription, you don't have to deal with all that. So— Yeah, those things are coming, I think, more and more. Well, uh, Kelvin, thanks for sharing those, uh, different opportunities and how it is that you can do that effectively in just a half-a-day consult there.

So our objective there— excuse me, I'm sorry— our objective there is to provide at least 10x return on investment from what they're providing in terms of their upfront costs. So So we think of it as an investment. We want to make sure they get a return on investment, and our objective is not only transformation but a 10x value.

That is quite a value in just a half-day consult. That is impressive. So the Consulting for Equity model is gaining traction. I don't really know what that is, so could you explain what that is and how this model works? the benefits that it offers both the consultants and the businesses that you're consulting with?

There are a couple different levels there. From a consultant standpoint, it gives us an opportunity to look at how can we provide additional value to the company as well as gain a portion of equity as we grow it. From the business owner side, it's an opportunity to say, well, rather than us pay you all of this money up front, To come in and fix something or get us to the next level, whether it's a sale, it's a future process, it's grow profits, whichever it happens to be. You know, can we come in and provide some resources on the front side as you work with us as we continue to grow? So there's usually a monthly revenue payout and investment from that standpoint as we continue to grow those transactional values. So as an example, a company that's doing, let's say, $2 million now wants to get to $4 or $5 million in a long time. You know, they want to do that through an acquisition. We can help them with the acquisition side. We may take a portion of the growth as a percentage, or they're trying to get to a specific revenue stream on a monthly basis, then, you know, Out of the profits that they're making, they pay us. So, we're sharing in that process of partnering with the business to help keep their upfront fees down, continue to grow them, and they see the progress, and they can pay us extra on the progress.

Well, yeah, I mean, that may cost them more, but—

No, it's an investment. It really won't cost them because we're trying to make sure that they're growing that process.

We're not— Exactly.

You know, for example, you know, if they're making a certain revenue stream now, we don't want to just say we're going to take out of that revenue stream. But if we boost that revenue stream, we'd like to share a profit of the growth in that process.

Yeah.

So there's something to keep us in our attention, but that we want to make that a benefit, not a cost. You know, one of our things is, is turn expenses into profits. So We don't want to have it to be just an expense. We want to make it a profitable transaction from that standpoint.

Well, it's what— I mean, what it says to me that there's a partnership there, that you have a stake in their success. You're not just doing an upfront consultation and say, do this, do this, do this, and take your money and run. You are actually partnering in the process to ensure that those profits are continuing, and if they don't, then you don't— you're not going to get your share of it either. So you're very much like— you have a stake in it as well.

Right, but it's not a control process, correct? But we're not looking to control things. We want the owners to still have control where they want to have control. Some are looking to step away. So there are opportunities where we can come and acquire a company if that's what they want to do, go ahead and exit, or we can help them plan that exit out in that 1 to 3 year time period we were talking about earlier. But the opportunity for them to grow without having to give complete control of their company— we're not looking to run things. We're looking to help them grow the process.

To just—

We're not looking for a job. We're looking for an opportunity to help them boost their value. And have some more fun and spend more time with family as they exit some of that process or get off the work trip.

Yeah, yeah. So for business owners with annual sales between $360,000 to $10 million, what specific challenges are they facing and how does your consulting How does that approach address these unique issues?

Well, as I mentioned earlier, one of the biggest challenges is having an owner in charge of everything. So it's not, you know, you're having someone come in for a meeting, someone's knocking on the door saying, how do I do this? Didn't we talk about that process last week? So setting up SOPs, Standard operating procedures, so you have that available to follow. And then looking at that revenue, is that plateauing in terms of revenue? You know, having us come in and look at structuring, restructuring for growth on sales, growth in the opportunities to reach out to more customers, how to cut costs, how to eliminate those expenses and turn those into profit. profits. And then the other aspect is, you know, many companies are weak on exit readiness, and how can we help them get to that point so that they're maximizing valuation? If they want to put their company up for sale, or they don't, you know, in either case, you know, someone looking at the value of that is going to look at, you know, if I come into this company, if I invest in this company, am I dependent on this one owner? Or these 2 or 3 people at the top and something happens to them, something happens to somebody in their family in that situation and they can't perform, then what do I do? You know, when we're looking at those companies, you know, in that range at $360,000 to $10 million, you know, oftentimes they'll have managers or people, long-term employees who've been there, you know, particularly when we're looking at 5 to 10 employees.

Right.

Usually somebody's got the skill set to be able to come in and help operate different aspects, and we'd like to keep them on in those positions when we're acquiring companies. Or for the owners to look at exiting in the future is to look at how can we do cross-training in preparation for them to take a higher role. And that helps boost the value because they already know the procedures, they're already in place, that people don't have to go out and hire the other ones, and they don't have to come in and buy a job. Yeah.

Well, I really, really like the approach and just the few minutes that we spent here together, it has just been really enlightening for me.

Thank you.

To look at these things from the perspectives that I really never have looked at them myself. And I can see how, how your process could be extraordinarily beneficial to me, and I'm sure to many others.

Thank you.

So you start off with, you had mentioned the 15 to 30 minute call that is essentially a free call. So how does that work, and how can that be effective to prepare For the actual 4-hour consultation?

The 15-minute, the 15 to 30-minute call will give them an opportunity to share insights as far as what they're finding as pain points, let's say, and we can look at those time periods to look to see if there's some quick wins we can advise them on. To go further, if they're qualify, then we look at the half-day consult as an opportunity to take them further in that process. And it's a precursor from our standpoint because if we do a good job in that, they may want us to stay on in that consulting for equity role. So we're going to bring as much value as possible during that time period to address those specific pain points and the importance of what— Is next. And during the 4-hour consult, or the half-day consult as it stands, is an opportunity for us to do that. So whether it's looking at improving sales, improving profits, improving the structure of the company, you know, looking at acquisitions, looking at exit structures, those kind of things we can address during that, that 4-hour consult, that half-day consult. And it gives them an opportunity to see One, you know, how a little working relationship between us could work and gives us a chance to check also because there's some people we may say, uh-uh, I can help you, but it's not worth the pain. The conversation is not going well. So, so one of those things in the process.

Yes.

But we want to, we want to bring as much value as possible during that half-day consult.

Well, Kelvin, it's really been very informative, and you have such a gentle approach, so I can see why you have been extraordinarily successful in this. I just want to, you know, point out, so many times in our Western culture, particularly here in the United States, we are so extroverted-focused that we think that in order to be successful, a person has to be an extrovert, but you have clearly demonstrated the power of the introvert and the power of quiet reflection, and I think that is so powerful and it is so often overlooked.

Thank you.

So thank you, Calvin, for being with us today. And enlightened investors, I know you've enjoyed this show today because I've enjoyed it immensely. So please take a moment to like, share, and subscribe. And if you would, please go to your favorite app, and we'd really appreciate it if you could leave us a rating and a review. So folks, until next time, live abundantly in all areas of your life, and we'll see you in the next episode.

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