September 6, 2025 • 32 mins
I will never forget reading Ken Blanchard's "One Minute Manager". It was at that point I started to catch my team doing something right instead of always finding what they were doing wrong.
Segment 1 with Martha Lawrence
Martha Lawrence is a veteran book editor and the executive editor at Blanchard, where she worked side-by-side with Ken Blanchard for over two decades. She has edited hundreds of books. Her new book is “Catch People Doing Things Right: How Ken Blanchard Changed the Way the World Leads”.
Segment 2 with Evan Levine and Nainesh Shaw
It’s a common saying in business that your company is only worth what people are willing to pay for it, but how do you set the asking price value or set a price when selling shares in the company or giving it to the next family generation?
My guests are Evan Levine and Nainesh Shaw at Complete Advisors also provides ancillary business advisory and valuation services including start-up valuations, succession planning, and valuation enhancement.
Become a supporter of this podcast: https://www.spreaker.com/podcast/the-small-business-radio-show--3306444/support.
Listen to all the episodes of The Small Business Radio Show at www.barrymoltz.com
Segment 1 with Martha Lawrence
Martha Lawrence is a veteran book editor and the executive editor at Blanchard, where she worked side-by-side with Ken Blanchard for over two decades. She has edited hundreds of books. Her new book is “Catch People Doing Things Right: How Ken Blanchard Changed the Way the World Leads”.
Segment 2 with Evan Levine and Nainesh Shaw
It’s a common saying in business that your company is only worth what people are willing to pay for it, but how do you set the asking price value or set a price when selling shares in the company or giving it to the next family generation?
My guests are Evan Levine and Nainesh Shaw at Complete Advisors also provides ancillary business advisory and valuation services including start-up valuations, succession planning, and valuation enhancement.
Become a supporter of this podcast: https://www.spreaker.com/podcast/the-small-business-radio-show--3306444/support.
Listen to all the episodes of The Small Business Radio Show at www.barrymoltz.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Get ready for all the craziness of small business. It's
exactly that craziness that makes it exciting and totally unbelievable.
Small Business Radio is now on the air with your host,
Barry Maltz.
Speaker 2 (00:17):
Well, thanks for joining this week's radio show. Remember this
is the final word in small business for those keeping track.
This is now show number eight hundred and forty seven.
Speaker 3 (00:27):
Well.
Speaker 2 (00:28):
I've read a lot of business books over the years
and talk to a lot of business leaders, but probably
one of the greatest leadership coaches of all time is
Ken Blanchard, because when we had him on the show
here in twenty fourteen, we discussed one of his phrases
that really is memorable to me. He always talked about
in his book One Minute Manager, how you got to
(00:49):
catch someone doing something right instead of something wrong. My
guest today is Martha Lauren. She's a veteran book editor
and executive editor at Blanchard, where she works side by
side with Ken for over two decades. She's edited hundreds
of books. But she's got a new book out. It's
called Catch People Doing Things Right. How Ken Blanchard changed
(01:09):
the way the world leads. Martha, Welcome to the show.
Speaker 4 (01:14):
Thank you, Barry. It's wonderful to be on again. I
just think you have a terrific show here. Thank you
for all the information over the years.
Speaker 5 (01:22):
So you've worked with Ken for a long time.
Speaker 2 (01:24):
One of his famous phrases is catch people doing something right.
Speaker 5 (01:27):
How do he come up with that?
Speaker 4 (01:30):
It actually comes from he was a university professor before
he became a best selling author and businessman, and he
did a lot of research on how people learn the
best and perform the best. And what he discovered is
that when you criticize someone, you shut them down. And
as human beings, we've sort of survived by finding out
(01:56):
what's wrong in our environment and jumping on that right.
Speaker 6 (01:59):
So to catch people doing things.
Speaker 4 (02:02):
Right is counter to our nature, and yet that is
what raises people's endorphin levels and really helps them to
perform well.
Speaker 2 (02:11):
Why this is so hard for leaders managers be able
to catch people doing something right because it's so easy
to criticize, but it's always to me hard to find
the good stuff.
Speaker 4 (02:22):
Well, again, we have to counter our natural programming, which
is you know, Ken talks famously about the seagull manager
who's never around until something goes wrong, and then he
flies in and dumps all over everybody and makes a
lot of noise and flies out. And that sort of
is a natural tendency because you're trying to make sure
(02:44):
that everything is going well and that your strategies are
being executed. But the truth is people are doing your work.
If you're leading an organization, people are doing the work
day to day and they need encouragement. You know, Ken says,
who needs encouragement Everybody who's breathing.
Speaker 6 (03:01):
And one of the.
Speaker 4 (03:01):
Secrets of the one minute manager is the one minute praising.
You know, catch someone doing something right, it will motivate them.
Speaker 6 (03:10):
Now this isn't to say that you just give empty praise.
Speaker 4 (03:13):
There's a way to catch people doing things right.
Speaker 7 (03:17):
You know.
Speaker 4 (03:17):
You don't just say hey, good job and slap someone
on the back. That's meaningless and can actually be counterproductive.
What you do is you actually look at what somebody
is doing that they're executing well, and you let that
person know what they did specifically, how it made you feel,
(03:37):
and what a difference they're making.
Speaker 2 (03:39):
You know, I've really felt that this book really changed
the tide, because before this, I think that a lot
of people thought that you kind of had to be.
I don't want to call the mean manager, but the
way that you got people who do things was through discipline,
right by through you know, criticizing them. And I think
that can really turn this around to say, well there
is a better way.
Speaker 6 (04:00):
There is a better way.
Speaker 4 (04:01):
I mean, he fundamentally changed the way people think about leadership.
You know, prior to the One Minute Manager coming out,
business books tended to be these big, dry, boring tomes
and they were sort of based on an autocratic form
of leadership.
Speaker 6 (04:18):
People.
Speaker 4 (04:18):
People thought that leadership was about controlling people and sort
of having power over them. And Ken's philosophy is that
leadership is an influence process. You know, It's something you
do with people, not two people. It's about empowering people,
not controlling them, you know.
Speaker 2 (04:39):
And I wonder, I think that we really evolved through
Ken's thinking other leaders of his time. But I feel
now we're moving back to the autocratic way of leadership
right with Donald Trump and some of these other things
where I am criticizing, I'm embarrassing, I'm calling people out.
I just wonder if there's going to be a counterweight
to that with other leaders in society.
Speaker 4 (05:00):
Well, you hit the nail on the head, Barry, because
this is what inspired me to write the book. You know,
obviously Ken is a seminal figure in leadership and was
worthy of a biography. But what made me want to
write the book is here is an example of a
leader who doesn't intimidate to win. He succeeded by being
a nice guy. And it's funny you mentioned an alternate
(05:22):
leadership style when The Apprentice came out. That was shortly
after I started working with Ken, and I thought about
how absolutely opposite that is from what Ken was teaching,
which was, you know, working.
Speaker 6 (05:37):
With people, not doing to them.
Speaker 4 (05:39):
I mean Jack Welch, the late chairman of General Electric,
He used to talk about firing the bottom, you know,
just customarily every year, getting rid of the bottom ten
percent of your company. And Ken was so rankled by that.
He said, well, you know, you don't go out and
hire losers. Why would you get of ten percent of
(06:01):
your workforce. You know, if somebody's not performing well a
lot of times, what his research found is that that
was the manager's fault, not the employee's fault. Or maybe
that employee was in the wrong position for their strengths.
But you know, you don't go out and hire losers,
and you certainly don't go out and fire losers every year.
Speaker 2 (06:19):
That's why I really want to feature this book on
the radio show because I think there's so because I
think I see a shift because of the president's an
autocratic leader, that people moving back.
Speaker 5 (06:28):
To that style.
Speaker 2 (06:29):
And I think that there's got to be an anchor
to this other, which I call you know more. I
think it makes more sense in the long run. I
think people are happier in organizations like this.
Speaker 4 (06:41):
Well, I agree with you, Barry, and I think Ken
would agree with you. But let's let's break that down
a little bit. You know, it's kind of black and
white thinking, either autocratic or democratic, and another thing democratic.
Speaker 5 (06:54):
I don't see Ken's style as being democratic, right.
Speaker 2 (06:56):
I think Ken pointed out how you can lead by
seeing the good in people and working with people rather
than telling them what to do.
Speaker 8 (07:04):
Right.
Speaker 4 (07:04):
Absolutely, And it gets more nuanced than that, even because
there are certain times when a directive leadership ship style
is appropriate. You know, if if you're in a burning
building so you don't want to take a survey of
how to get out, or a.
Speaker 2 (07:18):
Time of crisis, or a time of crisis where a
decision's got to be made, and the leaders.
Speaker 5 (07:22):
Makes a decision.
Speaker 4 (07:24):
So you you know, you adapt your leadership style to
the development level of the person being led. And but
the point is always yes, it's people are people are
your business. If you're even if you're in a sole proprietorship,
your focus should be on others, not on yourself.
Speaker 2 (07:41):
So you went access to a lot of Ken's personal letters,
as journals and private papers.
Speaker 5 (07:46):
What did you learn?
Speaker 4 (07:48):
What I learned is that Ken has been thinking about
this for his whole life. He really, even as a child,
he was interested in leadership. And he learned one of
his early earliest leadership lessons from his father, who was
retired as a rear admiral.
Speaker 6 (08:05):
In the Navy.
Speaker 4 (08:06):
And when Ken was in seventh grade, he won the
presidency of his seventh grade class. And he came home
and he was all proud of himself and he said,
I won the presidency.
Speaker 6 (08:15):
I'm hot stuff.
Speaker 4 (08:17):
And his dad said, Ken, I'm going to teach you
a lesson about leadership. Leaders are great not because of
the title they have, but because people love and respect
them and they want to follow them. So just because
you have a title, don't ever use it. You know,
be the person that people want to follow.
Speaker 2 (08:35):
You know, it's funny because my first ten year, nine
years of my career worked at IBM, and then I
went to work for a client and I started my
own businesses and I read at that point, you know,
every leadership book I could think of, and I thought
that I was really something as a leader. And then
when I did a three you know, a three sixty
survey and asked my people what they thought of my
leadership style.
Speaker 5 (08:55):
I had a lot to learn.
Speaker 2 (08:57):
And I think as leaders got to be able to
listen as well what our folks are telling us.
Speaker 4 (09:04):
Absolutely, absolutely, leadership, especially these days, it's more of a
side by side.
Speaker 6 (09:10):
You know, the world has changed.
Speaker 4 (09:12):
Things are moving so fast, and if you think you're
going to boss people around, you're not going to be
in a leadership position for very long.
Speaker 5 (09:20):
Unless it's a family business and they can't let you go.
That's a different conversation.
Speaker 2 (09:24):
So what were some of the best insights in the
documents that really surprised you when you went through Because
you've known Ken for a very long time, what stood out.
Speaker 4 (09:32):
To you What stood out to me in the documents
apart from you know, reading his PhD dissertation and finding
out that he had been he had been working on
these things for so long. But even back in high school.
One thing that really surprised me is that he went
to school during this whole time. In nineteen fifty four,
(09:53):
the Supreme Court handed down Brown versus Board of Education,
which was a desegregation of school. Ken was really in
the cauldron of all that he went to a segregated elementary.
Speaker 5 (10:05):
School and when was this? What stateon city was?
Speaker 6 (10:08):
This was in New York.
Speaker 4 (10:09):
He grew up in New York, so he went He
grew up in Newershell and ended up going to Cornell University,
so he's a New Yorker. But what surprised me was
that Ken, from an early age, even in elementary school,
it was segregated. He was a basketball player, had a
really killer outside jump shot, and so he got to
(10:29):
be friends with a lot of black kids because he
played in city leagues and kind of got outside that
segregated school. So by the time he got to high school,
he had a lot of black friends. And one of
the documents I ran across that just blew my mind
is that in nineteen fifty six, he and his best
(10:50):
friend Bobby Bradshaw, who was a black kid in high school,
started an organization called the Youth Fellowship, and they the
purpose of this was to bring the kids in the
high school together and to get rid of the silos.
And so I was surprised by that. I was surprised
to learn that Ken was. He was on the doctoral
committee for Malcolm X's wife, you know, at Cornell. He's
(11:14):
had a very interesting life.
Speaker 5 (11:17):
And so why do you think.
Speaker 2 (11:18):
He decided to focus on this particular area Because a
lot of academics really remain academics and they really can't
get through to the people working in the real world.
Speaker 6 (11:29):
Great question, Barry, So.
Speaker 4 (11:30):
Ken's super special sauce is that he is able to
take really complex ideas and turn them into actionable.
Speaker 6 (11:38):
Fun concepts. So when he was on.
Speaker 4 (11:42):
Sabbatical from the University of Massachusetts where he was teaching,
he gave a speech to an organization you might know
it called the Young President's Organization. Yeah, and the first
day it was a conference. In the first day of
the conference, he had maybe four hundred people listening. Word
got around that this guy from New York was incredible.
(12:03):
Had you know, it was funny and really interesting ideas.
Second day of the conference, eight hundred people show up.
Third day of the conference, the whole conference showed up
for Ken's talk, and they actually had to move the
partitions to create room for the crowd. And at the
end of the speech, you know, he got this thunderous
(12:24):
standing ovation. And so what happened was about five of
the Young President's members came up and said, you know, Blanchard,
what are you doing after this?
Speaker 6 (12:33):
What comes next?
Speaker 4 (12:34):
And he said, I'm going back to the University of
Massachusetts teach. And they said, you're crazy. You've got to
start a company when you're hot. You're hot, and he said,
how am I going to start a company? I can't
even balance my own checkbook. And they said, we'll help you.
And so that's how he started his own company. So,
you know, and I know, Barry, you wrote a book.
I think he wrote a book called something like you
(12:56):
need to be a little Bit.
Speaker 5 (12:57):
My first one. You got to be crazy to start
your own business?
Speaker 4 (12:59):
What you do exactly, And so you know, it was
a little bit crazy for this university professor to start
this company. And then of course he wrote the One
Minute Manager, taking these concepts that he'd been studying about
how to motivate people and how to you know, make
organizations come alive, and that went on to sell millions
(13:19):
of copies. Ken was actually on the list of Amazon's
greatest best selling authors of all time in two thousand
and five.
Speaker 6 (13:28):
So you know that's what happened with Ken.
Speaker 2 (13:32):
Well, you know you've worked with a lot of different authors, because,
as I said in the beginning of the show, you've
edited hundreds of book What's really different about Ken?
Speaker 4 (13:41):
What's different about Ken is he really walks his talk.
This is a person who has very little ego.
Speaker 6 (13:49):
And his mother.
Speaker 4 (13:50):
Used to ask him, you know he's written he's published
seventy books, and most of those books, yeah, seventy most
of those have been written with authors. And his mother
used to say to him, Kim, why don't you write
your own don't you want your name to be you know,
just your name on the book, And he said, Mom,
I already know what I know.
Speaker 6 (14:10):
Learning is a high value to me. I want to
so you know.
Speaker 4 (14:13):
That lack of ego, that that eagerness to.
Speaker 6 (14:16):
Learn and to sort of step out of the way.
Speaker 4 (14:19):
One of his famous quotes is no one of us
is as smart as all of us, and he really
lives that way. He's one of the humblest people I've
ever known.
Speaker 5 (14:28):
So tell us.
Speaker 2 (14:29):
About some of his other thing the quotes that really
stand out in your mind, because to me they're so impactful.
Speaker 4 (14:36):
Well, one of my favorite quotes, and I actually thought
about titling the book, This is Life is a very
special occasion.
Speaker 6 (14:44):
Don't miss it.
Speaker 4 (14:45):
You know, it's I think sometimes we get so caught
up in the rat race and our success and what
we're doing, we forget to pause and really take it in.
How what a privilege it is to be alive.
Speaker 6 (14:58):
He's got it.
Speaker 4 (14:59):
Yeah, a lot of quotes, you know, Catch people doing
things right is probably his most famous quote. Yeah, and
when someone asked him if if you could take away
only one of your you know, one of your teachings,
what would it be, And he said, catch people doing
things right, because you know, so often in life we
(15:21):
people everybody needs encouragement.
Speaker 5 (15:25):
Well, how do you you.
Speaker 2 (15:25):
Know, so a lot of leaders, you know, in order
to elevate themselves, they try to push out of the
people down, or they try to you know, I call
it blamestorming, right, they got to blame somebody else.
Speaker 5 (15:35):
But it seems to me that you know, Ken didn't
do that.
Speaker 2 (15:38):
As a leader, you try to figure out what went wrong, right,
don't do it again, and what you can do going forward.
Speaker 6 (15:45):
Exactly.
Speaker 4 (15:48):
Yeah, you know, it's it's about getting out of getting
out of the way so other people can be magnificent.
You know, That's that's really what it's about. And another
one of his quotes is, you know what is the question?
Love is the answer, and ultimately love, leadership is love.
It's about loving your mission, it's about loving your people,
(16:09):
and it's about loving yourself enough to get out of
the way so that other people can be magnificent.
Speaker 7 (16:15):
Yeah.
Speaker 2 (16:15):
I always talk about that. You know, leadership really is
caring about your your people. And a lot of people say, well,
you know I do care about my people. No, no, no, no, no,
I mean really care about your people, not like just
from your sitting in your golden palace.
Speaker 5 (16:28):
Care about my people. My minions.
Speaker 2 (16:30):
Really understand who they are, what their goals are, and
what difference they're going to make at your company and
why they're there. Right, what do they want to put
in their resume? What do they want to put in
their resume as their bullet Right? That they accomplished at
your company.
Speaker 6 (16:45):
It's so beautifully, said Barry. You're so right on.
Speaker 4 (16:47):
And the story that comes to my mind when you
say that is, you know, after nine to eleven, especially
if you're in the training business, where your business relies
a lot on air planes flying across the country delivering
trainers to corporations. This was before the advent of zoom
and virtual training. So after nine to eleven, like so
(17:09):
many companies, of the Blanchard Company was bleeding money, and
for the first time in its history, they were talking
about you know, they looked at the numbers and said, hey,
we got to do layoffs. And I talked to someone
who was in the meeting that day and she said,
I will never forget. Ken stood up and with tears
(17:30):
streaming down his face, he said, I did not build
this company to put my friends on the street at
a time like this.
Speaker 6 (17:39):
It's not going to happen no way.
Speaker 4 (17:40):
And you know, the other leaders said, you know, that's great, Ken,
we'd love to, you know, save.
Speaker 6 (17:47):
Everyone, but what are we going to do.
Speaker 4 (17:48):
We're going to be out of business very shortly if
this trend continues. And he said, you know, we always
talk about transparency and business. Let's open up the books,
let's show everybody what's happening, and let's brainstorm together. And
that's exactly what they did. People took voluntary pay cuts.
They it's amazing how many, how many economies you can
(18:09):
find when everyone's on board. And they pulled through that
and to celebrate afterward and when everybody recovered, they took
the whole company to Hawaii. Oh so that's an example
of you know, being there and walking your talk.
Speaker 2 (18:27):
Well, I appreciate you being on the show, Martha and
talking about KEM Blancher. The telebook is called catch People
Doing Something Right. How Ken Blanchard Changed the way the
world leads. Where can people catch up with you?
Speaker 4 (18:38):
They can catch up with me on Martha Lawrence dot com.
The book is available wherever books are sold. And if
anyone is interested in what the Blancher company does, there's
a site called Blanchard dot com. So, and if you're
interested in Ken's books, he also has an author website
called Ken Blanchardbooks dot com.
Speaker 5 (19:00):
Arthur, thanks so much. This small business radio show will
be right back.
Speaker 3 (19:03):
Thinking of starting your own business, get on board for
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at Barry Moltz and get a free copy of his book,
You Need to Be a Little Crazy, The truth about
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Speaker 1 (19:22):
Stick around to get your small business unstuck. More of
Small Business Radio with Barry Molts.
Speaker 2 (19:29):
It's a common saying in business that your company is
only worth what someone who's willing to pay for it.
But how do you set an asking price or how
do you set a price when selling shares in your
company or passing.
Speaker 5 (19:41):
It along to your next generation.
Speaker 2 (19:43):
Hit help with that is Evan Levine and Nina Shaw
who are at Complete Advisors. They provide business advisor and
valuation services including start valuations, success in planning, and valuation enhancement.
Speaker 5 (19:56):
Gentlemen, welcome to the show.
Speaker 8 (19:59):
Great to be here. Think you're ready.
Speaker 2 (20:01):
So Evan, why in your experience your small business owners
seek evaluations?
Speaker 7 (20:07):
Ah, There's so many reasons when a new engagement comes in.
I've put it into one or two categories. It could
be required by the irs for tax purposes, or it
could not be required just to put the idea. So
the second category is what I want to talk about.
The purpose is what drives the valuation, and I think
(20:32):
the most common purpose would be exit readiness. So for
some owners that are thinking about exiting or succession, a
good idea is to start by getting the business value professionally.
It's not for everyone. I mean, if someone comes along
with a big enough check, you're going to take it
and run. But for the owner that's more thoughtful and
(20:55):
wants to do it in a more measured way and
hasn't had time to think about it, starting in the
business you professionally can be a great first step that
could get the ball rolling and inform the rest of
the process.
Speaker 5 (21:07):
So Evan, when does the I R S require you
to get a valuation?
Speaker 7 (21:12):
Oh, if there's any transaction, So if if you're gifting
the business to cross or to children, or or you're
selling a business. If it's a public company, if it's
Apple or IBM, you can look it up on Yahoo.
But if it's a private company, how does the I
R S know what it's worth? You need a professional valuation,
(21:32):
signed by a qualified appraiser.
Speaker 2 (21:34):
So Nani is one of the things that Evan said
was you really have to understand the purpose of the valuation.
It seems to me that sometimes you want the value
of the company to be low, and sometimes you want.
Speaker 5 (21:43):
The valuated company to be high. Talk to us about that.
Speaker 8 (21:48):
That is so proud ary.
Speaker 9 (21:51):
So usually valuation, when you think about valuation, is a
combination of science, which is the financial.
Speaker 8 (21:59):
Rules and laws and how you how you come up
with the numbers.
Speaker 9 (22:04):
But then there's uh subjectivity, how do you interpret those numbers?
How do you because valuation can be arranged, uh.
Speaker 8 (22:12):
And what you really have to think about is.
Speaker 9 (22:17):
Finding finding out where your value resides. And so you
know that's that's how one should think about it. There
are many many different ways and methods that one one.
Speaker 8 (22:32):
Can value, uh.
Speaker 9 (22:34):
And you can definitely go into that conversation a little later.
Speaker 5 (22:38):
Yeah.
Speaker 8 (22:39):
So, yeah, and it happens.
Speaker 7 (22:42):
It happens all the time.
Speaker 8 (22:43):
If it's if it's in a.
Speaker 7 (22:45):
State, but it's not a flexible a state, and the
heirs are going to sell the business, they want to
higher value in the lower capital gains. If it's a
gift to a trust, then they've already used their exemptions.
They want a lower value for less taxes. If they're
selling it, they want to hire. So but what Nanish
tells me all the time is there it's it's a range,
and there's always with a room, there's always the art,
(23:07):
but it has to pass the sanity test. It has
to be reasonable. It has to follow a certain logic
and a story and and and a theme backed up
by numbers. So it's it's a there's a lot of
art in it, and there is a range, but uh,
it has to be reasonable and it has to be
able to be defended, is most importantly.
Speaker 8 (23:25):
Yeah, and you're going to say, if you're.
Speaker 9 (23:29):
Evic mentioned something about purpose, what is the purpose of
this value? And if you're selling it, you have to
think about valuation in a different way than if you
are just transferring to as a gift transfer. Uh, And
this this is all understanding the purpose and understanding how
you calculate from that basic purpose, the valuation will come
(23:53):
out differently.
Speaker 2 (23:54):
So so so let's hit on that, Naanish, what are
some of the basic valuation methods that you guys use.
Speaker 9 (24:02):
I think about valuation in three buckets and let me
call you call it approaches. There are three broad approaches
that one can take to value. The first approach is asset.
You try to understand what does the company own.
Speaker 8 (24:18):
So usually this applies to.
Speaker 9 (24:19):
Manufacturing, company, plant, machinery, inventory.
Speaker 8 (24:23):
All of that.
Speaker 9 (24:24):
The second approach is market or marketable comparison. So what
what you are thinking about is what another company, a
public or a private company has been trading for or
at what value, and you're comparing with that. So that's
that's like thinking. Think of it as you are buying
(24:45):
or selling a house and you are looking at the
other houses around in the neighborhood and trying to identify
value that way, and the third is looking at third
approach is more about future income, trying to predict the
future and then as in valuing.
Speaker 8 (25:00):
That within those.
Speaker 9 (25:02):
Approaches that have multiple methods, So asset approach might have
few methods that you can think about, market approach might
have multiple matters that you can think about, and income
approachect of course have multiple matters that you think so.
Speaker 2 (25:14):
Let's talk about let's talk about those because I think
it's really important. Mean, the asset approach is really easy
to identify kind of what's on the balance sheet. The
other ones for private companies are difficult, right because a
I could kind of forecast what's going to happen in
the future, I really have no idea. And the other
one is is it hard to get comparables and what
a similar sized company is sold for in the market.
Speaker 9 (25:36):
Yeah, you you hit it right on the nail, the transaction.
Speaker 8 (25:40):
There are data bases available.
Speaker 9 (25:41):
So when when a business broker does a transaction, that
are companies that try to collect that data. So that's
the one way we have we have access.
Speaker 8 (25:51):
To the data. It is it ideal, no, because the
quality of data might not be perfect, it might be stale.
That's that's one.
Speaker 9 (26:00):
You can look at public market companies, meaning there are
public companies that you can get really good quality data.
But the trouble with public companies private company might be
doing one small part of industry business business in the
industry that public company, large public company doing can can
be doing a lot.
Speaker 8 (26:19):
Uh simple its valuation insurance company just recently.
Speaker 9 (26:25):
And then we when we compare what we find is
all this insurance broker which does business in all kinds
of insurance.
Speaker 8 (26:32):
Uh So that's a challenge.
Speaker 2 (26:34):
Well, I think that makes a lot of sense. Again,
as you said from before, it's part art, it's part science.
So Evan, what are some of the common mistakes that
people make in valuation reports?
Speaker 7 (26:45):
Oh? Well, in terms in the context of exit readiness
or or management planning. I think one mistake is just
not doing it. You know, we think there's benefits to
getting valued, you know, every three to five years is
whether you're selling or not. And we speak to owners
all the time that have been around thirty years and
have never went through a professional valuation. So the biggest
(27:08):
obvious mistake is just not getting valued by a third
party professional that has an objective view. Again, in exit readiness,
another mistake would be doing it too late. So you know,
a transaction is already being discussed and then you try
to go out and get a valuation.
Speaker 8 (27:24):
You know if you're do it a few years in
advance and informs the.
Speaker 7 (27:28):
Exit so you know, through the valuation process you learn
about strengths and weaknesses.
Speaker 8 (27:33):
Ways to enhance value.
Speaker 7 (27:36):
Can be taken to reduced taxes, so forth, and so on.
So from where I said, the two biggest mistakes are
they're not doing it all or doing it too late.
As far as the technical nuances in the report, I
think name could speak most to some of those mistakes
he sees relating to discount rates and industry analysis and so.
Speaker 8 (27:55):
Forth and so on.
Speaker 2 (27:55):
But the names before you get an I want to
ask you when you when you do it. When when
someone exiting and you do a valuation, does the purchaser
care about your valuation? Because I've seen purchase sometimes say
that's fine. Let the valuation company buy your company if
that's what.
Speaker 5 (28:11):
They think it's worth. Do they care. It's just like
a point in time.
Speaker 8 (28:16):
Like great question.
Speaker 7 (28:19):
Uh, we don't.
Speaker 8 (28:20):
We don't know. Usually we don't know because we don't
get involved.
Speaker 7 (28:23):
You know, after the valuation is done, they're going to
take the.
Speaker 8 (28:26):
Next steps of hiring or we're going to sell.
Speaker 7 (28:28):
But I will tell you this. On several occasions, owners
came back to me and said that the valuation just
helped them think about things differently, and it helped inform
their next steps. In some cases, they used pieces of
the slides that we keep in mind Evaluation Report for
Exit RADY and this is what we call for your
eyes only, not going to the I r S. It's
(28:51):
not going to any tax authority.
Speaker 8 (28:53):
It actually looks like a fish deck.
Speaker 7 (28:56):
It slides in it and tracks and graphs. It's very intuitive.
It's only twenty pages where the higher supports one hundred pages.
So we've found owners use those slides to negotiate with sellers,
they make care.
Speaker 8 (29:10):
They might not care.
Speaker 7 (29:10):
Now, if you're selling to VC, then it's a waste
of time because they have their own they have their
own crazy math.
Speaker 8 (29:16):
And they're gonna they're gonna ignore it.
Speaker 7 (29:18):
So if you're selling to VC, no, But if it's
a traditional small business, then you're selling to some other
competitor or some buyer, it could help and it could
make a difference. So it all depends.
Speaker 2 (29:28):
So Nanish when you're actually doing the valuations, because you know,
as a business broker, people say, well, what's my business worth?
And there's some businesses it's difficult to determine.
Speaker 5 (29:38):
Actually, let's put this way.
Speaker 2 (29:39):
I'm always surprised when the business is worth and when
it's not worth on the open market, let's put it
that way. But usually a service business is worth a
certain multiple of their EBITDAH of their cash flow. Do
you do use that as one of the methods.
Speaker 9 (29:55):
Yes, So when you are thinking about some kind of
a mon you know, if you go to a business broker,
they will use some rule of thumb for the industry
that they are serving, and they'll say, okay, you know
one p' revenue for CPA from or something like that.
Speaker 8 (30:11):
We we think about that we use.
Speaker 9 (30:14):
So I mentioned earlier about market market comparable, and one
of the things that you're trying to grasp from that
market market.
Speaker 8 (30:23):
Comparable is what is the revenue mult people for this
public new or private company? What will the multiple public
new private company? That becomes one way to look at valuation.
Speaker 9 (30:37):
The best way to look at valuation is trying to
understand the current business model, is trying to somehow.
Speaker 8 (30:47):
Put some numbers around future of that business and that
present value. That's probably one of the best ways. Uh.
Speaker 9 (30:53):
And if you ask, you know, people with the fundamental
knowledge of finance, that's that's what they were saying, is
that'st goad to value your businesses looking at the future.
Speaker 7 (31:02):
And Mary, I just want to add this when when
Nanish and I started in twenty nineteen, I had a
business that he valued in a negotiation that we had.
It was the first time I had ever went through
a professional valuation. That I learned and a lot of
our clients have learned, is that the value of going
through a professional valuation is not the number. Usually the
(31:25):
owners has a good idea of what it's worth a million,
two million, five million that that's not news to them.
The value is the process when you work. When you
work at an independent professional who's.
Speaker 8 (31:38):
Going through a certain process, asking you very.
Speaker 7 (31:41):
Pointed questions, asking you to get all sorts of documents.
It's a big wake up call. And then once you
go through it, not only do you get to take
time to think about things, perhaps in a different way,
but you're much.
Speaker 8 (31:53):
More organized than you know, ready to go to the.
Speaker 7 (31:55):
Next step in the exit of succession.
Speaker 2 (31:57):
I agree, well, guys, I appreciate thank you to be
on the show, Evan. Where can people catch up with you,
guys of interested in and evaluation for their business?
Speaker 7 (32:06):
Yeah, if you go to Complete Advisors C O, M, P,
L E T A, d V I, S O R
S dot com you'll see us all our articles and
presentations and you could reach us through our website.
Speaker 2 (32:18):
Gentlemen, thanks for joining us, and I want to thank
everyone for joining this week's radio show. Our incredible staff,
Sarah Schaffrin and Ethan Moltz. Remember love everyone, trust a few,
and pal your own canoe have a profit and passionate week.
Speaker 1 (32:32):
You can find Barry Moltz on the web at Barrymolts
dot com for more episodes of Small Business Radio at
small business radioshow dot com.
Get ready for all the craziness of small business. It's
exactly that craziness that makes it exciting and totally unbelievable.
Small Business Radio is now on the air with your host,
Barry Maltz.
Speaker 2 (00:17):
Well, thanks for joining this week's radio show. Remember this
is the final word in small business for those keeping track.
This is now show number eight hundred and forty seven.
Speaker 3 (00:27):
Well.
Speaker 2 (00:28):
I've read a lot of business books over the years
and talk to a lot of business leaders, but probably
one of the greatest leadership coaches of all time is
Ken Blanchard, because when we had him on the show
here in twenty fourteen, we discussed one of his phrases
that really is memorable to me. He always talked about
in his book One Minute Manager, how you got to
(00:49):
catch someone doing something right instead of something wrong. My
guest today is Martha Lauren. She's a veteran book editor
and executive editor at Blanchard, where she works side by
side with Ken for over two decades. She's edited hundreds
of books. But she's got a new book out. It's
called Catch People Doing Things Right. How Ken Blanchard changed
(01:09):
the way the world leads. Martha, Welcome to the show.
Speaker 4 (01:14):
Thank you, Barry. It's wonderful to be on again. I
just think you have a terrific show here. Thank you
for all the information over the years.
Speaker 5 (01:22):
So you've worked with Ken for a long time.
Speaker 2 (01:24):
One of his famous phrases is catch people doing something right.
Speaker 5 (01:27):
How do he come up with that?
Speaker 4 (01:30):
It actually comes from he was a university professor before
he became a best selling author and businessman, and he
did a lot of research on how people learn the
best and perform the best. And what he discovered is
that when you criticize someone, you shut them down. And
as human beings, we've sort of survived by finding out
(01:56):
what's wrong in our environment and jumping on that right.
Speaker 6 (01:59):
So to catch people doing things.
Speaker 4 (02:02):
Right is counter to our nature, and yet that is
what raises people's endorphin levels and really helps them to
perform well.
Speaker 2 (02:11):
Why this is so hard for leaders managers be able
to catch people doing something right because it's so easy
to criticize, but it's always to me hard to find
the good stuff.
Speaker 4 (02:22):
Well, again, we have to counter our natural programming, which
is you know, Ken talks famously about the seagull manager
who's never around until something goes wrong, and then he
flies in and dumps all over everybody and makes a
lot of noise and flies out. And that sort of
is a natural tendency because you're trying to make sure
(02:44):
that everything is going well and that your strategies are
being executed. But the truth is people are doing your work.
If you're leading an organization, people are doing the work
day to day and they need encouragement. You know, Ken says,
who needs encouragement Everybody who's breathing.
Speaker 6 (03:01):
And one of the.
Speaker 4 (03:01):
Secrets of the one minute manager is the one minute praising.
You know, catch someone doing something right, it will motivate them.
Speaker 6 (03:10):
Now this isn't to say that you just give empty praise.
Speaker 4 (03:13):
There's a way to catch people doing things right.
Speaker 7 (03:17):
You know.
Speaker 4 (03:17):
You don't just say hey, good job and slap someone
on the back. That's meaningless and can actually be counterproductive.
What you do is you actually look at what somebody
is doing that they're executing well, and you let that
person know what they did specifically, how it made you feel,
(03:37):
and what a difference they're making.
Speaker 2 (03:39):
You know, I've really felt that this book really changed
the tide, because before this, I think that a lot
of people thought that you kind of had to be.
I don't want to call the mean manager, but the
way that you got people who do things was through discipline,
right by through you know, criticizing them. And I think
that can really turn this around to say, well there
is a better way.
Speaker 6 (04:00):
There is a better way.
Speaker 4 (04:01):
I mean, he fundamentally changed the way people think about leadership.
You know, prior to the One Minute Manager coming out,
business books tended to be these big, dry, boring tomes
and they were sort of based on an autocratic form
of leadership.
Speaker 6 (04:18):
People.
Speaker 4 (04:18):
People thought that leadership was about controlling people and sort
of having power over them. And Ken's philosophy is that
leadership is an influence process. You know, It's something you
do with people, not two people. It's about empowering people,
not controlling them, you know.
Speaker 2 (04:39):
And I wonder, I think that we really evolved through
Ken's thinking other leaders of his time. But I feel
now we're moving back to the autocratic way of leadership
right with Donald Trump and some of these other things
where I am criticizing, I'm embarrassing, I'm calling people out.
I just wonder if there's going to be a counterweight
to that with other leaders in society.
Speaker 4 (05:00):
Well, you hit the nail on the head, Barry, because
this is what inspired me to write the book. You know,
obviously Ken is a seminal figure in leadership and was
worthy of a biography. But what made me want to
write the book is here is an example of a
leader who doesn't intimidate to win. He succeeded by being
a nice guy. And it's funny you mentioned an alternate
(05:22):
leadership style when The Apprentice came out. That was shortly
after I started working with Ken, and I thought about
how absolutely opposite that is from what Ken was teaching,
which was, you know, working.
Speaker 6 (05:37):
With people, not doing to them.
Speaker 4 (05:39):
I mean Jack Welch, the late chairman of General Electric,
He used to talk about firing the bottom, you know,
just customarily every year, getting rid of the bottom ten
percent of your company. And Ken was so rankled by that.
He said, well, you know, you don't go out and
hire losers. Why would you get of ten percent of
(06:01):
your workforce. You know, if somebody's not performing well a
lot of times, what his research found is that that
was the manager's fault, not the employee's fault. Or maybe
that employee was in the wrong position for their strengths.
But you know, you don't go out and hire losers,
and you certainly don't go out and fire losers every year.
Speaker 2 (06:19):
That's why I really want to feature this book on
the radio show because I think there's so because I
think I see a shift because of the president's an
autocratic leader, that people moving back.
Speaker 5 (06:28):
To that style.
Speaker 2 (06:29):
And I think that there's got to be an anchor
to this other, which I call you know more. I
think it makes more sense in the long run. I
think people are happier in organizations like this.
Speaker 4 (06:41):
Well, I agree with you, Barry, and I think Ken
would agree with you. But let's let's break that down
a little bit. You know, it's kind of black and
white thinking, either autocratic or democratic, and another thing democratic.
Speaker 5 (06:54):
I don't see Ken's style as being democratic, right.
Speaker 2 (06:56):
I think Ken pointed out how you can lead by
seeing the good in people and working with people rather
than telling them what to do.
Speaker 8 (07:04):
Right.
Speaker 4 (07:04):
Absolutely, And it gets more nuanced than that, even because
there are certain times when a directive leadership ship style
is appropriate. You know, if if you're in a burning
building so you don't want to take a survey of
how to get out, or a.
Speaker 2 (07:18):
Time of crisis, or a time of crisis where a
decision's got to be made, and the leaders.
Speaker 5 (07:22):
Makes a decision.
Speaker 4 (07:24):
So you you know, you adapt your leadership style to
the development level of the person being led. And but
the point is always yes, it's people are people are
your business. If you're even if you're in a sole proprietorship,
your focus should be on others, not on yourself.
Speaker 2 (07:41):
So you went access to a lot of Ken's personal letters,
as journals and private papers.
Speaker 5 (07:46):
What did you learn?
Speaker 4 (07:48):
What I learned is that Ken has been thinking about
this for his whole life. He really, even as a child,
he was interested in leadership. And he learned one of
his early earliest leadership lessons from his father, who was
retired as a rear admiral.
Speaker 6 (08:05):
In the Navy.
Speaker 4 (08:06):
And when Ken was in seventh grade, he won the
presidency of his seventh grade class. And he came home
and he was all proud of himself and he said,
I won the presidency.
Speaker 6 (08:15):
I'm hot stuff.
Speaker 4 (08:17):
And his dad said, Ken, I'm going to teach you
a lesson about leadership. Leaders are great not because of
the title they have, but because people love and respect
them and they want to follow them. So just because
you have a title, don't ever use it. You know,
be the person that people want to follow.
Speaker 2 (08:35):
You know, it's funny because my first ten year, nine
years of my career worked at IBM, and then I
went to work for a client and I started my
own businesses and I read at that point, you know,
every leadership book I could think of, and I thought
that I was really something as a leader. And then
when I did a three you know, a three sixty
survey and asked my people what they thought of my
leadership style.
Speaker 5 (08:55):
I had a lot to learn.
Speaker 2 (08:57):
And I think as leaders got to be able to
listen as well what our folks are telling us.
Speaker 4 (09:04):
Absolutely, absolutely, leadership, especially these days, it's more of a
side by side.
Speaker 6 (09:10):
You know, the world has changed.
Speaker 4 (09:12):
Things are moving so fast, and if you think you're
going to boss people around, you're not going to be
in a leadership position for very long.
Speaker 5 (09:20):
Unless it's a family business and they can't let you go.
That's a different conversation.
Speaker 2 (09:24):
So what were some of the best insights in the
documents that really surprised you when you went through Because
you've known Ken for a very long time, what stood out.
Speaker 4 (09:32):
To you What stood out to me in the documents
apart from you know, reading his PhD dissertation and finding
out that he had been he had been working on
these things for so long. But even back in high school.
One thing that really surprised me is that he went
to school during this whole time. In nineteen fifty four,
(09:53):
the Supreme Court handed down Brown versus Board of Education,
which was a desegregation of school. Ken was really in
the cauldron of all that he went to a segregated elementary.
Speaker 5 (10:05):
School and when was this? What stateon city was?
Speaker 6 (10:08):
This was in New York.
Speaker 4 (10:09):
He grew up in New York, so he went He
grew up in Newershell and ended up going to Cornell University,
so he's a New Yorker. But what surprised me was
that Ken, from an early age, even in elementary school,
it was segregated. He was a basketball player, had a
really killer outside jump shot, and so he got to
(10:29):
be friends with a lot of black kids because he
played in city leagues and kind of got outside that
segregated school. So by the time he got to high school,
he had a lot of black friends. And one of
the documents I ran across that just blew my mind
is that in nineteen fifty six, he and his best
(10:50):
friend Bobby Bradshaw, who was a black kid in high school,
started an organization called the Youth Fellowship, and they the
purpose of this was to bring the kids in the
high school together and to get rid of the silos.
And so I was surprised by that. I was surprised
to learn that Ken was. He was on the doctoral
committee for Malcolm X's wife, you know, at Cornell. He's
(11:14):
had a very interesting life.
Speaker 5 (11:17):
And so why do you think.
Speaker 2 (11:18):
He decided to focus on this particular area Because a
lot of academics really remain academics and they really can't
get through to the people working in the real world.
Speaker 6 (11:29):
Great question, Barry, So.
Speaker 4 (11:30):
Ken's super special sauce is that he is able to
take really complex ideas and turn them into actionable.
Speaker 6 (11:38):
Fun concepts. So when he was on.
Speaker 4 (11:42):
Sabbatical from the University of Massachusetts where he was teaching,
he gave a speech to an organization you might know
it called the Young President's Organization. Yeah, and the first
day it was a conference. In the first day of
the conference, he had maybe four hundred people listening. Word
got around that this guy from New York was incredible.
(12:03):
Had you know, it was funny and really interesting ideas.
Second day of the conference, eight hundred people show up.
Third day of the conference, the whole conference showed up
for Ken's talk, and they actually had to move the
partitions to create room for the crowd. And at the
end of the speech, you know, he got this thunderous
(12:24):
standing ovation. And so what happened was about five of
the Young President's members came up and said, you know, Blanchard,
what are you doing after this?
Speaker 6 (12:33):
What comes next?
Speaker 4 (12:34):
And he said, I'm going back to the University of
Massachusetts teach. And they said, you're crazy. You've got to
start a company when you're hot. You're hot, and he said,
how am I going to start a company? I can't
even balance my own checkbook. And they said, we'll help you.
And so that's how he started his own company. So,
you know, and I know, Barry, you wrote a book.
I think he wrote a book called something like you
(12:56):
need to be a little Bit.
Speaker 5 (12:57):
My first one. You got to be crazy to start
your own business?
Speaker 4 (12:59):
What you do exactly, And so you know, it was
a little bit crazy for this university professor to start
this company. And then of course he wrote the One
Minute Manager, taking these concepts that he'd been studying about
how to motivate people and how to you know, make
organizations come alive, and that went on to sell millions
(13:19):
of copies. Ken was actually on the list of Amazon's
greatest best selling authors of all time in two thousand
and five.
Speaker 6 (13:28):
So you know that's what happened with Ken.
Speaker 2 (13:32):
Well, you know you've worked with a lot of different authors, because,
as I said in the beginning of the show, you've
edited hundreds of book What's really different about Ken?
Speaker 4 (13:41):
What's different about Ken is he really walks his talk.
This is a person who has very little ego.
Speaker 6 (13:49):
And his mother.
Speaker 4 (13:50):
Used to ask him, you know he's written he's published
seventy books, and most of those books, yeah, seventy most
of those have been written with authors. And his mother
used to say to him, Kim, why don't you write
your own don't you want your name to be you know,
just your name on the book, And he said, Mom,
I already know what I know.
Speaker 6 (14:10):
Learning is a high value to me. I want to
so you know.
Speaker 4 (14:13):
That lack of ego, that that eagerness to.
Speaker 6 (14:16):
Learn and to sort of step out of the way.
Speaker 4 (14:19):
One of his famous quotes is no one of us
is as smart as all of us, and he really
lives that way. He's one of the humblest people I've
ever known.
Speaker 5 (14:28):
So tell us.
Speaker 2 (14:29):
About some of his other thing the quotes that really
stand out in your mind, because to me they're so impactful.
Speaker 4 (14:36):
Well, one of my favorite quotes, and I actually thought
about titling the book, This is Life is a very
special occasion.
Speaker 6 (14:44):
Don't miss it.
Speaker 4 (14:45):
You know, it's I think sometimes we get so caught
up in the rat race and our success and what
we're doing, we forget to pause and really take it in.
How what a privilege it is to be alive.
Speaker 6 (14:58):
He's got it.
Speaker 4 (14:59):
Yeah, a lot of quotes, you know, Catch people doing
things right is probably his most famous quote. Yeah, and
when someone asked him if if you could take away
only one of your you know, one of your teachings,
what would it be, And he said, catch people doing
things right, because you know, so often in life we
(15:21):
people everybody needs encouragement.
Speaker 5 (15:25):
Well, how do you you.
Speaker 2 (15:25):
Know, so a lot of leaders, you know, in order
to elevate themselves, they try to push out of the
people down, or they try to you know, I call
it blamestorming, right, they got to blame somebody else.
Speaker 5 (15:35):
But it seems to me that you know, Ken didn't
do that.
Speaker 2 (15:38):
As a leader, you try to figure out what went wrong, right,
don't do it again, and what you can do going forward.
Speaker 6 (15:45):
Exactly.
Speaker 4 (15:48):
Yeah, you know, it's it's about getting out of getting
out of the way so other people can be magnificent.
You know, That's that's really what it's about. And another
one of his quotes is, you know what is the question?
Love is the answer, and ultimately love, leadership is love.
It's about loving your mission, it's about loving your people,
(16:09):
and it's about loving yourself enough to get out of
the way so that other people can be magnificent.
Speaker 7 (16:15):
Yeah.
Speaker 2 (16:15):
I always talk about that. You know, leadership really is
caring about your your people. And a lot of people say, well,
you know I do care about my people. No, no, no, no, no,
I mean really care about your people, not like just
from your sitting in your golden palace.
Speaker 5 (16:28):
Care about my people. My minions.
Speaker 2 (16:30):
Really understand who they are, what their goals are, and
what difference they're going to make at your company and
why they're there. Right, what do they want to put
in their resume? What do they want to put in
their resume as their bullet Right? That they accomplished at
your company.
Speaker 6 (16:45):
It's so beautifully, said Barry. You're so right on.
Speaker 4 (16:47):
And the story that comes to my mind when you
say that is, you know, after nine to eleven, especially
if you're in the training business, where your business relies
a lot on air planes flying across the country delivering
trainers to corporations. This was before the advent of zoom
and virtual training. So after nine to eleven, like so
(17:09):
many companies, of the Blanchard Company was bleeding money, and
for the first time in its history, they were talking
about you know, they looked at the numbers and said, hey,
we got to do layoffs. And I talked to someone
who was in the meeting that day and she said,
I will never forget. Ken stood up and with tears
(17:30):
streaming down his face, he said, I did not build
this company to put my friends on the street at
a time like this.
Speaker 6 (17:39):
It's not going to happen no way.
Speaker 4 (17:40):
And you know, the other leaders said, you know, that's great, Ken,
we'd love to, you know, save.
Speaker 6 (17:47):
Everyone, but what are we going to do.
Speaker 4 (17:48):
We're going to be out of business very shortly if
this trend continues. And he said, you know, we always
talk about transparency and business. Let's open up the books,
let's show everybody what's happening, and let's brainstorm together. And
that's exactly what they did. People took voluntary pay cuts.
They it's amazing how many, how many economies you can
(18:09):
find when everyone's on board. And they pulled through that
and to celebrate afterward and when everybody recovered, they took
the whole company to Hawaii. Oh so that's an example
of you know, being there and walking your talk.
Speaker 2 (18:27):
Well, I appreciate you being on the show, Martha and
talking about KEM Blancher. The telebook is called catch People
Doing Something Right. How Ken Blanchard Changed the way the
world leads. Where can people catch up with you?
Speaker 4 (18:38):
They can catch up with me on Martha Lawrence dot com.
The book is available wherever books are sold. And if
anyone is interested in what the Blancher company does, there's
a site called Blanchard dot com. So, and if you're
interested in Ken's books, he also has an author website
called Ken Blanchardbooks dot com.
Speaker 5 (19:00):
Arthur, thanks so much. This small business radio show will
be right back.
Speaker 3 (19:03):
Thinking of starting your own business, get on board for
a crazy ride. Be the first person to tweet Berry
at Barry Moltz and get a free copy of his book,
You Need to Be a Little Crazy, The truth about
starting and growing your own business. You will need the company.
Speaker 1 (19:22):
Stick around to get your small business unstuck. More of
Small Business Radio with Barry Molts.
Speaker 2 (19:29):
It's a common saying in business that your company is
only worth what someone who's willing to pay for it.
But how do you set an asking price or how
do you set a price when selling shares in your
company or passing.
Speaker 5 (19:41):
It along to your next generation.
Speaker 2 (19:43):
Hit help with that is Evan Levine and Nina Shaw
who are at Complete Advisors. They provide business advisor and
valuation services including start valuations, success in planning, and valuation enhancement.
Speaker 5 (19:56):
Gentlemen, welcome to the show.
Speaker 8 (19:59):
Great to be here. Think you're ready.
Speaker 2 (20:01):
So Evan, why in your experience your small business owners
seek evaluations?
Speaker 7 (20:07):
Ah, There's so many reasons when a new engagement comes in.
I've put it into one or two categories. It could
be required by the irs for tax purposes, or it
could not be required just to put the idea. So
the second category is what I want to talk about.
The purpose is what drives the valuation, and I think
(20:32):
the most common purpose would be exit readiness. So for
some owners that are thinking about exiting or succession, a
good idea is to start by getting the business value professionally.
It's not for everyone. I mean, if someone comes along
with a big enough check, you're going to take it
and run. But for the owner that's more thoughtful and
(20:55):
wants to do it in a more measured way and
hasn't had time to think about it, starting in the
business you professionally can be a great first step that
could get the ball rolling and inform the rest of
the process.
Speaker 5 (21:07):
So Evan, when does the I R S require you
to get a valuation?
Speaker 7 (21:12):
Oh, if there's any transaction, So if if you're gifting
the business to cross or to children, or or you're
selling a business. If it's a public company, if it's
Apple or IBM, you can look it up on Yahoo.
But if it's a private company, how does the I
R S know what it's worth? You need a professional valuation,
(21:32):
signed by a qualified appraiser.
Speaker 2 (21:34):
So Nani is one of the things that Evan said
was you really have to understand the purpose of the valuation.
It seems to me that sometimes you want the value
of the company to be low, and sometimes you want.
Speaker 5 (21:43):
The valuated company to be high. Talk to us about that.
Speaker 8 (21:48):
That is so proud ary.
Speaker 9 (21:51):
So usually valuation, when you think about valuation, is a
combination of science, which is the financial.
Speaker 8 (21:59):
Rules and laws and how you how you come up
with the numbers.
Speaker 9 (22:04):
But then there's uh subjectivity, how do you interpret those numbers?
How do you because valuation can be arranged, uh.
Speaker 8 (22:12):
And what you really have to think about is.
Speaker 9 (22:17):
Finding finding out where your value resides. And so you
know that's that's how one should think about it. There
are many many different ways and methods that one one.
Speaker 8 (22:32):
Can value, uh.
Speaker 9 (22:34):
And you can definitely go into that conversation a little later.
Speaker 5 (22:38):
Yeah.
Speaker 8 (22:39):
So, yeah, and it happens.
Speaker 7 (22:42):
It happens all the time.
Speaker 8 (22:43):
If it's if it's in a.
Speaker 7 (22:45):
State, but it's not a flexible a state, and the
heirs are going to sell the business, they want to
higher value in the lower capital gains. If it's a
gift to a trust, then they've already used their exemptions.
They want a lower value for less taxes. If they're
selling it, they want to hire. So but what Nanish
tells me all the time is there it's it's a range,
and there's always with a room, there's always the art,
(23:07):
but it has to pass the sanity test. It has
to be reasonable. It has to follow a certain logic
and a story and and and a theme backed up
by numbers. So it's it's a there's a lot of
art in it, and there is a range, but uh,
it has to be reasonable and it has to be
able to be defended, is most importantly.
Speaker 8 (23:25):
Yeah, and you're going to say, if you're.
Speaker 9 (23:29):
Evic mentioned something about purpose, what is the purpose of
this value? And if you're selling it, you have to
think about valuation in a different way than if you
are just transferring to as a gift transfer. Uh, And
this this is all understanding the purpose and understanding how
you calculate from that basic purpose, the valuation will come
(23:53):
out differently.
Speaker 2 (23:54):
So so so let's hit on that, Naanish, what are
some of the basic valuation methods that you guys use.
Speaker 9 (24:02):
I think about valuation in three buckets and let me
call you call it approaches. There are three broad approaches
that one can take to value. The first approach is asset.
You try to understand what does the company own.
Speaker 8 (24:18):
So usually this applies to.
Speaker 9 (24:19):
Manufacturing, company, plant, machinery, inventory.
Speaker 8 (24:23):
All of that.
Speaker 9 (24:24):
The second approach is market or marketable comparison. So what
what you are thinking about is what another company, a
public or a private company has been trading for or
at what value, and you're comparing with that. So that's
that's like thinking. Think of it as you are buying
(24:45):
or selling a house and you are looking at the
other houses around in the neighborhood and trying to identify
value that way, and the third is looking at third
approach is more about future income, trying to predict the
future and then as in valuing.
Speaker 8 (25:00):
That within those.
Speaker 9 (25:02):
Approaches that have multiple methods, So asset approach might have
few methods that you can think about, market approach might
have multiple matters that you can think about, and income
approachect of course have multiple matters that you think so.
Speaker 2 (25:14):
Let's talk about let's talk about those because I think
it's really important. Mean, the asset approach is really easy
to identify kind of what's on the balance sheet. The
other ones for private companies are difficult, right because a
I could kind of forecast what's going to happen in
the future, I really have no idea. And the other
one is is it hard to get comparables and what
a similar sized company is sold for in the market.
Speaker 9 (25:36):
Yeah, you you hit it right on the nail, the transaction.
Speaker 8 (25:40):
There are data bases available.
Speaker 9 (25:41):
So when when a business broker does a transaction, that
are companies that try to collect that data. So that's
the one way we have we have access.
Speaker 8 (25:51):
To the data. It is it ideal, no, because the
quality of data might not be perfect, it might be stale.
That's that's one.
Speaker 9 (26:00):
You can look at public market companies, meaning there are
public companies that you can get really good quality data.
But the trouble with public companies private company might be
doing one small part of industry business business in the
industry that public company, large public company doing can can
be doing a lot.
Speaker 8 (26:19):
Uh simple its valuation insurance company just recently.
Speaker 9 (26:25):
And then we when we compare what we find is
all this insurance broker which does business in all kinds
of insurance.
Speaker 8 (26:32):
Uh So that's a challenge.
Speaker 2 (26:34):
Well, I think that makes a lot of sense. Again,
as you said from before, it's part art, it's part science.
So Evan, what are some of the common mistakes that
people make in valuation reports?
Speaker 7 (26:45):
Oh? Well, in terms in the context of exit readiness
or or management planning. I think one mistake is just
not doing it. You know, we think there's benefits to
getting valued, you know, every three to five years is
whether you're selling or not. And we speak to owners
all the time that have been around thirty years and
have never went through a professional valuation. So the biggest
(27:08):
obvious mistake is just not getting valued by a third
party professional that has an objective view. Again, in exit readiness,
another mistake would be doing it too late. So you know,
a transaction is already being discussed and then you try
to go out and get a valuation.
Speaker 8 (27:24):
You know if you're do it a few years in
advance and informs the.
Speaker 7 (27:28):
Exit so you know, through the valuation process you learn
about strengths and weaknesses.
Speaker 8 (27:33):
Ways to enhance value.
Speaker 7 (27:36):
Can be taken to reduced taxes, so forth, and so on.
So from where I said, the two biggest mistakes are
they're not doing it all or doing it too late.
As far as the technical nuances in the report, I
think name could speak most to some of those mistakes
he sees relating to discount rates and industry analysis and so.
Speaker 8 (27:55):
Forth and so on.
Speaker 2 (27:55):
But the names before you get an I want to
ask you when you when you do it. When when
someone exiting and you do a valuation, does the purchaser
care about your valuation? Because I've seen purchase sometimes say
that's fine. Let the valuation company buy your company if
that's what.
Speaker 5 (28:11):
They think it's worth. Do they care. It's just like
a point in time.
Speaker 8 (28:16):
Like great question.
Speaker 7 (28:19):
Uh, we don't.
Speaker 8 (28:20):
We don't know. Usually we don't know because we don't
get involved.
Speaker 7 (28:23):
You know, after the valuation is done, they're going to
take the.
Speaker 8 (28:26):
Next steps of hiring or we're going to sell.
Speaker 7 (28:28):
But I will tell you this. On several occasions, owners
came back to me and said that the valuation just
helped them think about things differently, and it helped inform
their next steps. In some cases, they used pieces of
the slides that we keep in mind Evaluation Report for
Exit RADY and this is what we call for your
eyes only, not going to the I r S. It's
(28:51):
not going to any tax authority.
Speaker 8 (28:53):
It actually looks like a fish deck.
Speaker 7 (28:56):
It slides in it and tracks and graphs. It's very intuitive.
It's only twenty pages where the higher supports one hundred pages.
So we've found owners use those slides to negotiate with sellers,
they make care.
Speaker 8 (29:10):
They might not care.
Speaker 7 (29:10):
Now, if you're selling to VC, then it's a waste
of time because they have their own they have their
own crazy math.
Speaker 8 (29:16):
And they're gonna they're gonna ignore it.
Speaker 7 (29:18):
So if you're selling to VC, no, But if it's
a traditional small business, then you're selling to some other
competitor or some buyer, it could help and it could
make a difference. So it all depends.
Speaker 2 (29:28):
So Nanish when you're actually doing the valuations, because you know,
as a business broker, people say, well, what's my business worth?
And there's some businesses it's difficult to determine.
Speaker 5 (29:38):
Actually, let's put this way.
Speaker 2 (29:39):
I'm always surprised when the business is worth and when
it's not worth on the open market, let's put it
that way. But usually a service business is worth a
certain multiple of their EBITDAH of their cash flow. Do
you do use that as one of the methods.
Speaker 9 (29:55):
Yes, So when you are thinking about some kind of
a mon you know, if you go to a business broker,
they will use some rule of thumb for the industry
that they are serving, and they'll say, okay, you know
one p' revenue for CPA from or something like that.
Speaker 8 (30:11):
We we think about that we use.
Speaker 9 (30:14):
So I mentioned earlier about market market comparable, and one
of the things that you're trying to grasp from that
market market.
Speaker 8 (30:23):
Comparable is what is the revenue mult people for this
public new or private company? What will the multiple public
new private company? That becomes one way to look at valuation.
Speaker 9 (30:37):
The best way to look at valuation is trying to
understand the current business model, is trying to somehow.
Speaker 8 (30:47):
Put some numbers around future of that business and that
present value. That's probably one of the best ways. Uh.
Speaker 9 (30:53):
And if you ask, you know, people with the fundamental
knowledge of finance, that's that's what they were saying, is
that'st goad to value your businesses looking at the future.
Speaker 7 (31:02):
And Mary, I just want to add this when when
Nanish and I started in twenty nineteen, I had a
business that he valued in a negotiation that we had.
It was the first time I had ever went through
a professional valuation. That I learned and a lot of
our clients have learned, is that the value of going
through a professional valuation is not the number. Usually the
(31:25):
owners has a good idea of what it's worth a million,
two million, five million that that's not news to them.
The value is the process when you work. When you
work at an independent professional who's.
Speaker 8 (31:38):
Going through a certain process, asking you very.
Speaker 7 (31:41):
Pointed questions, asking you to get all sorts of documents.
It's a big wake up call. And then once you
go through it, not only do you get to take
time to think about things, perhaps in a different way,
but you're much.
Speaker 8 (31:53):
More organized than you know, ready to go to the.
Speaker 7 (31:55):
Next step in the exit of succession.
Speaker 2 (31:57):
I agree, well, guys, I appreciate thank you to be
on the show, Evan. Where can people catch up with you,
guys of interested in and evaluation for their business?
Speaker 7 (32:06):
Yeah, if you go to Complete Advisors C O, M, P,
L E T A, d V I, S O R
S dot com you'll see us all our articles and
presentations and you could reach us through our website.
Speaker 2 (32:18):
Gentlemen, thanks for joining us, and I want to thank
everyone for joining this week's radio show. Our incredible staff,
Sarah Schaffrin and Ethan Moltz. Remember love everyone, trust a few,
and pal your own canoe have a profit and passionate week.
Speaker 1 (32:32):
You can find Barry Moltz on the web at Barrymolts
dot com for more episodes of Small Business Radio at
small business radioshow dot com.
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