MBA1418 Guest Teacher: Ashley Micciche – How To Value Your Business in 30 Minutes For Free

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Hey O welcome to the $100 RMBA show because your business means the world to you. That's why we Deliver D Daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the Hundred Dollar mba, a complete business training and community online. And today's lesson is a guest teacher lesson. On our guest teacher lessons we bring on an expert to teach their area of expertise. Today we have Ashley Michiche, the CEO of True North Retirement Advisors, which is an independent financial advisory firm managing over $230 million. And in today's lesson she's going to show you how to value your business in 30 minutes for free. So today you're going to understand how to evaluate and know how much your business is worth. Some of us will want to move on to other challenges, other businesses, or maybe retire in the future. And it's good to know how much you can get for your business when you go to sell it. When you go to exit. This is a good exercise to do regardless if you're looking to sell your business now or in the future.

Why?

By knowing your company value, you'll know your weak spots. You'll know where you need to improve so you can increase the value of your business. So one day when you do sell, you're in the best position possible. Ashley's going to clean up some misconceptions when it comes to valuing your business, finding out how much it's worth, going through the eight basic pieces of information you need to have so you can be able to know the value of your business and even share a piece of technology, a tool you can use that will make this quick, easy and free. This is a solid lesson with some gold golden nuggets. Can't wait to jump into this one. Let's get into it. Let's get down to business. When you Start a business. When you build a business, as the years roll on, what you're doing essentially is building an asset. You're building something that has value. It's an entity that will produce value for others, whether it's the product or also producing value in terms of money. Right. It's making money every month and there's plenty of people who that will be interested in a business that makes money. But how much is your business worth? This is super important to know because are you getting a fair deal when it's time to sell? It's also good to know, have you recouped your investment? Is your business worth more than what you've put into up to this point, or how much more do you need to continue to go in order to hit that point? In today's guest teacher lesson, Ashley's going to break down exactly how to value your business. The formula, the numbers you need to look for, and she's going to walk you step by step. I'm going to hand it over to Ashley now so she could teach you the guest lesson. But I'll be back to wrap it up and give my takeaways. But for now, take it away, Ashley.

Hi there. My name is Ashley Miciche. Thank you so much for joining me today. I'm going to teach you all about how to value your business in 30 minutes for free. That's right. You heard that, right? For free. All right, let me just start off with a couple of misconceptions about valuing your business. Actually, there's three. One is that it's very expensive. A lot of business valuations can easily cost you $10,000 or more to have a certified valuation done. B is that it's disruptive to your business. So someone's going to come in and they're going to poke around and talk to your staff and, like, go through your inventory, all this stuff. And it's going to take four to six weeks for them to come up with a valuation. So it's going to be disruptive, time consuming, expensive. And once business owners get a sense for, that's what it's going to be. It's no wonder that only 2% of business owners across the country know what their business is worth. So in 2016, the business exit Institute did a study and what they found is that only 2% of business owners actually know what they're worth. Their business is worth probably that 2% are like the people who are just ready to exit too. Like, there's a good reason they know what their business is Worth. So if you have ever thought about exiting your business, I want you to remember this. Knowing what your business is worth is an essential first step in embarking on that exit planning process. Because it's sort of like putting your current location in on your gps. If you want turn by turn directions, like, we're going to the exit, that's our destination. We want to exit, we want to retire, we want to do it successfully.

But.

But if you want those turn by turn directions to go from where you are currently to where you want to go, we have to know what the business is worth. So knowing what your business is worth is like putting that current location on the gps. It's the critical starting point to then get some turn by turn directions. And that makes sense because if your business is worth a million dollars today, but you need it to be worth 2 million to exit, that's totally fine. We just need to know how big that gap is because then we know what we need to focus on and prioritize in order to close the gap. And that's very different than having your business be worth $2 million. But you only need it to be worth a million dollars in order to exit. So it changes the things that you do in order to plan the priorities that you focus on in planning your exit change based on what the value says and what you need that value to be. All right, so hopefully I have emphasized enough why this is so important, why this is so critical. So I want to start getting into the nitty gritty of actually how you go about doing this. How do you even value your business? For free, no less. Here's how you do it. In my experience with talking with valuation experts, I've tried to make this as easy and painless as possible. Because I know that if you have to go back and get three years worth of financial data and like 84 different data points, you're not going to do this. What I've come up with is a list of the eight critical pieces of information that you'll need to get a solid valuation for your business. So, you ready? I want you to get a pen and paper, write this down. Number one, revenue. Easy, you know, revenue. Okay? All of these, you're gonna see as I go through that they're not that difficult. And unless your books and records are a complete and utter mess, you're gonna be able to gather this information pretty quickly, pretty readily. You can find it on your tax return and then like your books and records, so your balance sheet, your income statement, et cetera, it's all highly and easily accessible. Okay, so let's start over. So we have revenue is the first one. Then pre tax income, officer compensation, that's basically what you pay yourself as the owner operator. But there's a couple of little caveats to that. Accounts receivable, accounts payable, bank loans, your long term EBITDA margin. That stands for earnings before interest, taxes, depreciation and amortization. Say that 10 times fast. Anyways, your long term EBITDA margin. And then whether or not you rent or own the place where you're, where you operate your business out of, that's it, eight pieces of information. And what that allows you to do is get a really solid estimate of value for your business that can then serve as the starting point for your exit. So you can probably tell me pretty quickly how much revenue you brought in the door last year, how much profit your business had. So we've already solved the first two. And you know what, I have a little secret for you. You only need those first two pieces of information to get a valuation. Now the more you enter, the more accurate the valuation is going to be. But you only need those two pieces of information. Revenue, pre tax income. And you can get a really good start on your ballpark valuation for your business. But we want a good strong estimate of value. So if you can gather all eight pieces of information, you're going to set yourself up for a much better, better estimate of value. I actually put together a checklist that's going to help you gather these eight pieces of information. And so let me just share with you how you can get that checklist. So if you go to www.truenorthra.com valuemybusiness, you can get your checklist right there. And the other beauty of this, I'm going to share with you next how you can go through in the valuation tool and enter this data to get your valuation, whether you value your business today. And then you make some changes in your business and want to value it again in six months or a year, you can go back as many times as you want to and use that tool. So we make it available. As long as we're paying for it, you might as well use it. We actually pay for this, but we make it available to our clients because we find that it's so valuable. And then we opened it up to anybody who wants to use it. And I find that more than anything else, if you can figure out what your business is worth, it's like the thing that sort of unlocks the box and then you can just make progress and continue to make progress. So that's why we make it available for free with literally no strings attached. We want you to go in and value your business and get started on this exit. Because the exit from your business, most business owners, all of their assets, most of their assets are tied up in the business. And it's absolutely critical that you're able to navigate a successful exit. And the place to start is valuing your business. So let me explain a little bit more about the valuation tool and what it looks like in in real life. So let's say you take all of that data and you fill out your checklist and you find it. Oh, by the way, I forgot to mention, on that checklist, it doesn't just list the data, it shows you where you can find it. So if it's your tax return, it'll show you the specific line item on your tax return. And then if it's on your balance sheet or income statement, I tell you where you can find it. And then I also define it to make it easier for you to understand and make sure you're getting the right data, which is absolutely critical. I love to do evaluation example of a dental practice and one that I've done recently is a dental practice. It's a family dental practice that has revenue of about 1.1 million and then pre tax income of about 250,000. And then we entered all of those other metrics in there and the valuation tool that we use was able to generate a valuation for this practice based on those metrics of $690,000. And what's really amazing about this online valuation tool, other than the fact that it's free and it's accessible accessible, is that this family dental practice that I do as an example, is one of over 370,000 offices of dentists in the United States that are in this database. So it's not like even if you have kind of an obscure business, it's not like you're going to be comparing your business and not getting good data. Because the key to evaluation, just like a Zillow for your home or Kelley Blue Book for your car, it's all about the comparative data. Like we want to look at your business versus other like kind businesses. And this database is so robust, IT has over 55 million businesses in the database. It's continuously updated. So the accuracy and quality of the database only gets better over time. It's absolutely fantastic. So this family dental practice valued at $690,000 is like I said one of over 370,000 across the country. So you can see how your business ranks among other like kind businesses and then around the country. And then you can also see how it ranks in your local geographic area as well, which is really, really powerful. Once you gather those eight pieces of information about the business, write it down on your checklist. It only takes 10 minutes to key in this data. The software is very intuitive and when you get the checklist, you're also going to receive the your special link that you can get to go enter your business. And it's all confidential, it's free. This is just the sort of thing we help our clients with day after day. And guess what? Once you've done this, you have just taken the important first step in getting off that entrepreneur train and successfully planning and starting to plan your exit. So I'm super excited to make this available to you again. If you go to truenorthra.com valuemybusiness, all of the information, the checklist, access to the tool is there. You can even download a tutorial video if you're allergic to technology and you want some help with this. So whether your business is in growth mode, you've never thought of your exit or you want to exit in 10 years or yesterday. Finding out what your business is worth is the key to getting unstuck and starting on that exit path. Man, just picture a day your business is no longer running. You picture a day where you have lasting and generational financial security because you successfully exited your business on your terms. And it all starts with knowing what your business is worth. All right, thank you so much for listening to this lesson today. I hope it was helpful for you. If you want to continue learning about exit planning, valuing your business, all the necessary things to do to successfully navigate your exit, you can head on over to truenorthra.com valuemybusiness everything's right there. Also, I put out YouTube videos every single week on exit planning topics. So everything from non qualified deferred compensation plans to what happens to your business if something happens to you unexpectedly. And you can find that at True North Retirement is the name of the channel. So thanks again for joining me today. Back to you, Omar.

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What a great lesson by Ashley Micciche. She was generous enough to give us a free checklist and free access to that tool. She mentioned that valuation tool. To understand and know the value of your business, all you got to do is go to this link truenorthra.com valuemybusiness everything you need will be right there. One of my favorite takeaways from this lesson and one of the takeaways I got by actually going through the process and valuing our business, is that you get a little clarity on how you're doing. And it's actually a great feeling because you realize, wow, I got this asset worth X amount of dollars. All this work I put into building this business actually paid off. And it gives you a sense of relief. You know, if the, you know, ceiling caves in, you have something that you can use as leverage as you can use to build upon. If you want to start a new business, you could sell this one. Use the money, use the value, and build a bigger business. This is actually a really fun exercise and a good way to get your head around the worth, the value of what you've been building all these years. Thank you so much for listening to the $100 MBA show. If you love what you hear, hit subscribe right now. And whatever you use to listen to podcasts, whether it's Apple Podcasts, Stitcher Radio, Spotify, Overcast, Himalaya, we're on them all. Hit subscribe right now. By hitting subscribe, you tell that provider that app, hey, love the show. Give me the next one once it's ready. It also helps us grow and get more exposure on the platform. So thank you in advance for that. Before I go, I want to leave you with this. This is actually a really good exercise to do before you decide to quit your business. A lot of people just decide to just like drop their business and they're like, oh, I don't want to do this anymore, move on. They kind of just leave it there. Well, by doing this, you get to find out, hey, did the money I spend, the money that I put into invested in this business to get it started? Have I gotten it back? Is it worth that much money or more? And if so, if there is some value here, why not sell it to somebody instead of just neglecting it? You can use that capital to start your next project or heck, invest in your retirement. Many of us think that, hey, who's going to buy this business? It only generates X amount of dollars. Believe me, there's lots of people out there looking for opportunities just like that kind of business that they can really just take to the next level, that have an interest for it, that have a passion for it, and you have everything already set up and built and websites and URLs and all that kind of stuff. They don't go through the headaches. You already did it. Get some money out of it at least. Thank you so much for listening to the $100 NBA show. I'll check you in tomorrow's episode. I'll see you then. Take. Sam.