Business Valuation 101 | How to Determine What a Business Is Worth? What Is Your Business REALLY Worth? NYT & FT praised McKinsey Partner & Leader of Corporate Finance, Tim Koller Shares How to Determine a Business’ Worth

Audio Transcription

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(Speaker 2)
We started from the bottom, now we’re here Folks, on today’s show, we are joined with a living legend. This man has been doing the same great thing for 30 plus years, despite the fact that he looks like he’s 22 years old. He’s probably eating organic. So, ladies and gentlemen, if you’re out there today and you’re saying, what can I do? What can I do to deval evaluate the value of my company?

(Speaker 2)
How does business valuation work? How does one determine what a business is worth? How do I measure and manage the value of my company? If you’re watching today’s show and you’ve ever wanted to own a company, you own a company and you’re confused about what your company’s worth or what a company could be worth, you’re going to want to take notes. Without any further ado, the man with the plan,

(Speaker 2)
the leader of corporate finance, Tim Collar, welcome onto the Thrive Time Show. How are you, sir?

(Speaker 1)
Thank you, Clay. It’s great to be here.

(Speaker 2)
Tim, I got to ask you this. There’s so many people that say, man, Clay, listen, my landscaping company, and this happens a lot. My landscaping company’s gotta be worth $20 million. I say, why is that? They say, well, my total gross revenue was three million, so obviously it’s 20 million. I go, how do you figure that out? They said, well, you look at the value of X.

(Speaker 2)
I mean, X, when Elon Musk purchased Twitter, I mean, think about that. And I go, I don’t know that that correlates in any way, shape, I’ve got this bakery, and it’s easily worth $2 million. I say, how is it worth $2 million? They said, I did $5 million of total sales last year. I said, profit?

(Speaker 2)
They go, no, $5 million of total sales. I said, what was your profit? They said, $100,000. I go, I don’t think it works that way. And so I’m constantly excited to learn from you today because you are sort of a guru in this space.

(Speaker 2)
So first off, where do most people get it wrong as it relates to determining the value of a small or large business?

(Speaker 1)
Well, I think where most people get it wrong is where emotion comes into it, as you just said. And I find that often, we work with, often with very large companies, medium-sized companies, some smaller companies, and oftentimes CEOs, particularly CEOs of listed companies

(Speaker 1)
think that their companies are undervalued. But when you ask them what analysis that they’ve done, it usually has been pretty superficial. Or they have looked at something else and said, well, we should be worth as much as this other company, right? So that’s where people get it wrong because they don’t actually sort of think about, you know, what are the true economics of their business.

(Speaker 2)
So let’s start small and then we’ll get really big. So I want to start small here. At some point 30 years ago, you had to, you had to have started somewhere. I mean, now you’re this legendary guru who’s praised by McKinsey. You know, you’re a guy who’s written a bestselling book about the topic of business valuation, but where did you start your business career?

(Speaker 1)
Well, I started my business career after business school. I went to the University of Chicago, now called the Booth School, and I joined Mobile Oil. At the time, the oil companies were the high flyers, if you will. This was in the early 80s. I was there for a couple of years, learned about how big companies work, the good and

(Speaker 1)
the bad. And then I went to a very small consulting firm, Stern Steward & Company. What appealed to me there was what they were doing was applying finance theory rigorously to the valuation of companies. So that’s how I learned the basics of what I’ve been doing. I was there for a couple of years and then I joined McKinsey at the time, decided that they were going to build a corporate finance practice to help companies think about what’s

(Speaker 1)
going on in the world. This was the era of the corporate raiders who were taking over companies and we needed to understand what was going on and why and what these companies were worth. So they decided to build a corporate finance practice and they recruited me to be part of the team that started that up. And one of the first things that we did was we wanted to make sure that McKinsey consultants

(Speaker 1)
around the world were essentially doing the same thing in terms of the way they evaluated companies, the way they analyzed financial performance. So we wrote a handbook for McKinsey consultants and that handbook, it’s in a three ring binder, I still have a copy of it.

(Speaker 1)
And someone said, oh, you should show this to a publisher. So we showed it to a couple publishers. They were interested in it. And we chose a publisher and we turned it into a real book. The publisher said a book like this, you know, pretty technical, but if it’s really successful, we’ll sell 10,000 copies.

(Speaker 1)
We’re now up over a million copies over the last 35 years. I think that’s because it sort of filled a niche that wasn’t filled before. Most of the academic books on finance don’t really tell you, you know, when you actually sit down to value a company, how do you actually take the financial statements and turn them into, you know, how do you analyze them, how do you deal with all the unusual accounting issues, etc. A lot of the practitioner books were not grounded in theory. So we brought together finance, accounting, strategy, and I think that’s what made the

(Speaker 1)
book unique and that’s why it’s been successful.

(Speaker 2)
Now let’s get into the real house of a lot of our business owners watching today’s show. So let’s say that a guy watching today’s show is, let’s say he’s a music school teacher, music school teacher, all right? And he has memberships. So he charges people, I’m thinking of an example that relates to one of my clients. They’ve got, they’re charging $50 a month for members to go to their music school.

(Speaker 2)
They have 4,000 members, so 4,000 members paying approximately $50 per month. How would you even start to determine the value of a company like that? Because the pianos aren’t worth a lot, their keyboards aren’t worth a lot, their real estate’s not that impressive,

(Speaker 2)
but adding it all up together, they somehow take one plus one and equals five for them from a cashflow perspective. How do you, or how would you sit down with a business owner like that and help them to determine the true value of their business?

(Speaker 1)
It’s interesting that you ask that question that way. Even though our book to a large extent deals with listed companies, the second chapter is we start out with a very small company to illustrate how the principles work because they’re the same for a large company or a small company. And essentially what you want to look at

(Speaker 1)
is the cash flows that a company generates over a long period of time. And the way to think about that though is not just the cash flows, because the cash flows combine profits and investment, stuff like that. So you can decompose those cash flows combine profits and investment, stuff like that.

(Speaker 1)
So you can decompose those cash flows into two things that any company can look at, right? How fast are you growing that company? How fast are the revenues growing? How fast are the profits growing? And then secondly, what’s your return on capital?

(Speaker 1)
And what that is, is simply, what are the operating profits that you’re generating? So your revenues minus all your operating expenses and minus taxes. And you divide that by the invested capital. How much have you got invested in the pianos in your example? How much have you got invested in office equipment or computers or other furniture, et cetera,

(Speaker 1)
if you’re a piano company? And so you’re trying to understand what is the relationship just as you would look at any kind of investment, a bond or a stock, what are you earning versus what have you put into the business? So that’s what it boils down to. So what are your revenues, how fast are they growing?

(Speaker 1)
And what’s your return on capital? And that then can be easily translated into the cash flows of the company. Think about how long that’s sustainable. You can discount that back and come up with the value of the company.

(Speaker 1)
It works very well for any kind of size company.

(Speaker 2)
I’m not trying to paint you into a corner, but I’m just trying to drill down a little bit for the average listener who’s watching today’s show because I know there’s a lot of small business owners that watch this show with great enthusiasm and intensity. Going back to this music school example, because I’m really dialing in on this for a second There’s about two million dollars of gross revenue coming in because there’s paying the average member is paying $50 a month There’s 4,000 members And in this example, the business is making a profit of about three hundred thousand dollars a year three hundred thousand dollars a year on

(Speaker 2)
on two million dollars of gross revenue If that’s where it’s at and somebody’s trying to list their business or put their business up for sale, if the company’s debt-free and they’re kind of a stagnant 4,000 members-ish in their community, how would you, where would be the range that someone would determine their business was worth given those kind of variables?

(Speaker 1)
Well, what we need to do is we need to translate that profit. Well, there’s a couple of things you can do. I mean, back of the envelope, you could sort of say, okay, a typical business like this is worth a multiple of that $300,000. Let’s say 10 times, so it’d be $3 million, right?

(Speaker 1)
If you were confident that you could have the valuation of other companies that are similar, doing similar things, that are growing the same rate, et cetera. Now, let’s assume you don’t have that, though. Then you need to translate that into cash flows. So you need to say, okay, we’ve got our $2 million a year. We’re growing at 5% a year.

(Speaker 1)
So our profits, let’s assume, are gonna grow at also at 5% a year. And in order to grow those profits, we have to invest more. We have to invest more in pianos. We have to invest more in, you know,

(Speaker 1)
chairs or something like that, right? And so let’s assume maybe you have to invest 50,000 of that $300,000 of profits back into the business every year. So you get 250,000 leftover of cash flow, which you can use to pay yourself, let’s say,

(Speaker 1)
assuming that the profit already takes in consideration sort of a base salary. But you got $250,000 of cash flow leftover. You grow that at 5% a year. And then you can sort of say, okay, if I expect to earn a 10% return on my capital, what’s the present value of that 250,000 growing at 5% a year, discounted at 10%. That’s pretty back, pretty easy, pretty back of the envelope, right? If you, and then you can back test that by looking at

(Speaker 1)
the valuations of similar companies relative to that profit level.

(Speaker 2)
So again, you really know your craft. I just wanted to bring this up as an example. So I want people to really understand that you know what you’re talking about here. Now, let’s get into your new book here. This is the eighth edition of the book.

(Speaker 2)
So tell us about what’s the title of the book and tell us about why this is the eighth edition and not the first edition or the second edition. Why is this the eighth edition of the same book?

(Speaker 1)
So the title of the book is called Valuation, Measuring and Managing the Value of Companies. It is the eighth edition. We’ve been updating it every five years since the first edition. So it’s been out there for 35 years.

(Speaker 1)
And the reason we, and people ask me, what would I do different today versus 35 years ago in valuing a company? And I tell them I would value a company exactly the same as I would 35 years ago. I mean, the software has changed that allows, you know, spreadsheets have gotten better and

(Speaker 1)
easier to work with over that period of time. But the principles remain the same. The reason we keep updating it, though, is because the environment in which companies are operating changes. So we need to take that into consideration. The tax, the accounting rules change, the tax rules change. So we’re constantly adding or

(Speaker 1)
subtracting or adjusting things to reflect what’s going on. So for example, in the latest edition, we have a chapter on digital and AI. So how do you think about how does AI affect the value of your company or how do you value an AI company? We have a chapter on sustainability, right?

(Speaker 1)
How does carbon emissions affect the value of your company? How does trends related to that affect the value of your company? How does trends related to that affect the value of your company? How do, you know, we had a period of time from the financial crisis up through a couple years ago where we had abnormally low interest rates. How does that affect the value of your company? So those are the kind of things that we need to take into consideration that we are, that’s why we’re constantly updating the book.

(Speaker 2)
Now, in your book, you talk about this four-step framework that can assess the value of individual projects, business units, and entire companies with a consistent methodology.

(Speaker 1)
Walk us through your four-step framework. So the framework is, first, you want to assess what kind of revenues you can generate, right? What kind of revenues are you generating right now, or if you want to use the word sales, and how fast can that grow by taking into consideration how big the market is that you’re participating in, what kind of market share can you earn, do you have any kind of price premium that you can charge

(Speaker 1)
because you have a better product or you provide a better service. So we always start with the revenue forecast, right? Then we figure out what are the costs involved in generating those revenues? You know, if you’re a manufacturing business,

(Speaker 1)
what are the costs of the materials? What are the costs of converting those materials? What are your overhead costs? What are your sales and marketing costs? What are your product development costs, et cetera? You subtract that off in your taxes

(Speaker 1)
to come up with the operating profits of the business. So that’s the next step, right? Then you figure out how much capital do I need? How much investment do I need? How much, if it’s a manufacturing business, I need to have a factory, I need to have a warehouse.

(Speaker 1)
If it’s a service business, I need to have offices. I need to have computers, those kind of things. How much capital do I need in order to run that business? And so then that gives me, if I put all that together, I’ve got now the revenues, I’ve got the costs, and therefore the profits, and I’ve

(Speaker 1)
got the capital or the investment that I have to make. And then what’s left over are the cash flows. And I discount those cash flows to come up with the value of the company. I also wanna take into consideration, is my cash flow forecast reasonable or not, right?

(Speaker 1)
Is it reasonable in light of the competition that I face? Is it reasonable in light of whether or not my product is a premium or not? Those kinds of things as well, right? If I’m an auto company, if I’m a big auto company, for example,

(Speaker 1)
if I look back over history, auto companies don’t earn $10,000 a year per car on average, right? So if I’m forecasting I’m going to earn $10,000 or $20,000 a year per car, that’s probably unrealistic. So I want to try to find some reference points as well to validate the assumptions that I’m making.

(Speaker 2)
Now, one of the things we have in our world today is there is a lot of unpredictable variables that we face, to say the least, one of which is tariffs. So in my lifetime, I get up 44 years old. So during my 44 years on the planet, I don’t recall a time where the idea of large tariffs being

(Speaker 2)
imposed or not being imposed changes on a daily basis. I’ve never seen it. Maybe somebody else could correct me historically, but I’ve just never seen a sitting president throw out using the use of or the potential use of large tariffs or no tariffs or big tariffs or exponentially big tariffs or I mean it’s it’s really it’s it’s a wild playing field. So what advice does your book have or does it even have advice for the leaders of companies out there that are trying to

(Speaker 2)
communicate to their employees, to customers, to shareholders about what the prices of things may

(Speaker 1)
or may not be in the not so distant future? Well first of all the book came all, the book was finished before this tariff discussion became an issue. Publishing world takes a while, so there’s nothing in the book about tariffs. But it has created tremendous uncertainty. And so it’s really the general problem is one of uncertainty and how do you deal with uncertainty, whether it’s tariffs or something else. And I guess what I encourage companies to do whenever there is uncertainty,

(Speaker 1)
and there’s always some kind of uncertainty, is to first figure out, what’s the length of time of the uncertainty? Will it be resolved? And what’s your planning horizon? If your planning horizon is longer than the uncertainty, you have to think then about,

(Speaker 1)
okay, so how does this affect my short-term actions and how does it affect my long-term actions? My short-term actions are usually dictated by whatever I can do to deal with what’s happening. If there are tariffs, can I raise prices? If I can’t raise prices, do I have to absorb the cost of the tariffs? How quickly can I find alternative sources of supply if I’m importing, et cetera. So this is the short-term actions. The long-term actions are,

(Speaker 1)
do I want to rearrange my supply chain? Do I want, where do I want to invest? How do I want to build the next plant, et cetera. And so that’s where you have to think about, when will we get resolution on these things? And when can I make decisions?

(Speaker 1)
I was, I remember talking to, this is before the tariff issue, the CFO of a large supermarket chain about, should they, just a couple of years ago when we were, there was uncertainty about inflation and where interest rates were going and whether we’re going gonna have a recession.

(Speaker 1)
And I asked them, I said, well, how long, they were thinking about, should they continue to build stores, right? Or not, should they pause? I said, well, how long does it take you to build stores? And they said, well, it takes us two to three years

(Speaker 1)
to build a store. And I said, well, the typical recession lasts 12 months or so, right? So it takes you longer to build a store than the typical recession. So if you are always being focused on what’s happening right now in the short term,

(Speaker 1)
you will end up often missing opportunities because there are pockets of growth in the country that’ll be growing regardless of what’s happening to the economy, what’s happening with the recessions, et cetera. So you have to sort of take a long-term view often and say, okay, what’s this going to look like in five years to 10 years to make important strategic decisions? Once again, keeping in mind short-term decisions that I have to deal with today that I

(Speaker 1)
think I can change right now, and how does it affect the long-term investments that I have to deal with today that I think I can change right now, and how does it affect the long-term investments that I make for the future?

(Speaker 9)
I wanna go back-

(Speaker 7)
And by the way-

(Speaker 1)
Yeah. I was gonna say, by the way, the uncertainty will always be there. I mean, that’s the nature of business is uncertainty. And you have to just, you look at scenarios, you look at,, try to get smart about how things might play out.

(Speaker 1)
You’re never going to get rid of that uncertainty, and you have to live with it and make the best choices that you can.

(Speaker 2)
And I promise I’ll eventually get off this music school example. Maybe I’ll get off this after you get off the podcast. But there are people out there, small business owners, that I know watch the show. And they’re going, okay, under that scenario, this company, this fictitious example, this music school

(Speaker 2)
I was giving you an example of with 4,000 members approximately at $50 a month of recurring revenue making a couple hundred thousand dollars a year of profit. Are you saying that a business like that, given your valuation, assuming the business was debt-free, that in your mind that company would be worth around $2 million, like a multiple? Is that what you’re saying?

(Speaker 2)
Or help us even dumb it down so that even I can grasp.

(Speaker 1)
Yeah, yeah, okay. So I said $300,000 of profits, right? And about $250,000 of cash flow, because I have to subtract off that. If I had 250,000 of cash flow and I wanted a 10% return, and let’s assume the business wasn’t growing any,

(Speaker 1)
so I would take a $250,000 stream the way I’d value a bond or a bank account, and say, OK, $250,000 a year discounted at 10% is the equivalent of multiplying it by 10 times. So that $250,000 of cash flow would be worth $2.5 million. Now, if I’m growing that cash flow, it’ll be worth more. So if I am growing that cash flow at, let’s say, 2% a year,

(Speaker 1)
then without going into the math, instead of being worth about 10 times the current cash flows, it’d be worth about 12 and a half times the cash flows, right? So 250 times 12 and a half. So it’s closer to 3 million rather than 2 million. Or rather than 2.2 and a half million. Sorry.

(Speaker 2)
And I just want people to understand that the mastery that you have of the subject, I mean, you’ve been doing this for 30 years. And so when you write this book, it might seem big pie in the sky to some people, or for some people this topic is very important right now, but I’m telling you whether you’re a small business owner or a big business owner, you got to check out the book Valuation. I really do think it’s going to bless you, it’s going to help you, it’s going to help

(Speaker 2)
you be able to understand what a business is worth. One of the topics that you talk about often is rooting out groupthink, and I love that topic. I love rooting out groupthink because I’ll give an example before I T up this question for you. I find that when I work with businesses a business owner will say to me Clay We’re gonna go with billboard marketing and I go Okay

(Speaker 2)
And how did you determine that billboard? Marketing is gonna be the new leg of your marketing stool the new platform with which you would try to achieve Customers for your roofing company and they say well everybody everybody in my office agrees Billboards are the way to go everybody and I go everybody they go. Oh, yeah, everybody and I go walk me through the process where everybody Chimed in and they go when we got our staff together on our Monday meeting everybody had a coffee I said guys

(Speaker 2)
I want you to tell me what’s the best way we’re gonna take our company forward how we’re gonna grow this thing and my front desk lady, she said, billboards. And you know, she’s a, people like her, she’s been with us for a long time. And then my sales guy goes, exactly, that’s what I’m saying. And then I said, well, how many of you think we should do billboards? And everybody said, it’s unanimous, we should do billboards. And I go, that my friend is groupthink. So could you please

(Speaker 2)
talk to the listeners out there about what is groupthink and why is it dangerous for business?

(Speaker 1)
Okay. Groupthink is, this is a topic that I’ve become very excited about over the last 10 years or so is how do organizations actually make decisions, right? And what gets in the way of making rational decisions? And there are cognitive biases that we all have in the way we make decisions and organizations have those biases as well. And groupthink is one of them, right?

(Speaker 1)
There are others like in businesses, we see a lot of what we call inertia. People just, you know, this year’s budget is plus or minus, you know, last year’s budget is plus or minus last year’s budget. Or confirmation bias, where we look for supporting data

(Speaker 1)
instead of contravening data for what we’re looking to do. Groupthink, and it’s got a very sort of close sibling called sunflower management, which I also like to, because it sounds just as fun as groupthink, right? Sunflower management refers to a similar kind of thing where there’s no real debate.

(Speaker 1)
Sunflowers always face the sun. They turn, right, as the sun moves. And sunflower management refers to when people, instead of giving their own point of view, they try to guess what the most senior person in the room wants to hear.

(Speaker 1)
And that’s the answer that they give. Groupthink, it’s similar kind of thing, is you’re in a group with seven or eight people, maybe more. And some people get excited about billboard management. And you think, OK, well, this is going in this direction. I don’t think billboard management is a very good idea,

(Speaker 1)
but if everyone else is excited about it, I don’t wanna sort of raise my, I don’t wanna be the outlier or whatever. So I’m gonna keep my mouth shut basically, even though I’m not comfortable with the idea. That’s what groupthink is, right,

(Speaker 1)
is when the momentum of the meeting causes, eliminates debate, eliminates sort of opposing points of view. People aren’t comfortable. And you need to do things to overcome that, because every many organizations of all sizes, you talked about a very small company,

(Speaker 1)
but it also affects the largest companies. It affects government, all kinds of things. And so you need to purposely do things to overcome that groupthink.

(Speaker 8)
Now I see-

(Speaker 7)
Go ahead.

(Speaker 2)
I was gonna say, I see it all the time with Republican presidents and Democrat president to give an example, there’s a press secretary that you know the press secretary of the day is kind of the fresh meat for the reporters and a reporter every once while you get about one reporter, you know per press conference Alaska question that makes sense and

(Speaker 2)
that is free of groupthink and then right away most of these press secretaries on both the Republican and Democrat side have found a way to personally attack the reporter, question their intelligence for even bringing it up, and then the other reporters are like, yeah, yeah, yeah, that was a bad question. And I watched this and it’s grandstanding. I don’t even know that the argument strategy being used,

(Speaker 2)
but I see it all the time. You’ll see a reporter, they put their hand up, excuse me, Mr. President, Mr. President, Mr. President, whatever. Mr. President, I have a question. And then they’ll go to the press, they’ll have a question.

(Speaker 2)
The press secretary will say, well, the president doesn’t want to answer that question because it’s an absurd question. Oh my gosh. And the other reporters will look over at that reporter and go, oh, geez, come on, come on. And you watch it. It happens a lot in government. It happens a lot in business. But I think, and maybe you disagree, Tim,

(Speaker 2)
I think that most business owners think that it doesn’t happen in their organization.

(Speaker 1)
It depends on when you ask them that question, right? Maybe the business owners don’t believe it because they think they’re open-minded. But if you ask their staff, you’d probably say, yeah, we do that. So it really depends on who you ask

(Speaker 1)
and whether you ask them in private or in a group, for example. So it is pervasive. And one of the stories I recall, the memoirs of one of John F. Kennedy’s advisors talks about the Bay of Pigs.

(Speaker 1)
And he was sitting in a room, and while this was being discussed, he said, this is a really bad idea in his head. But he didn’t say anything. And in his memoir, he says, that was my greatest thing I’m disappointed in myself in was

(Speaker 1)
that I didn’t speak up when I had that opportunity. And there might have been other people who agreed with him. So it is out there. I usually find, though, that it’s not in organizations, it’s, you know, if you get the people on the side, they usually will. Yeah, we don’t have good debates, right? And you have to take, you have to be purposeful to create a good debate. And you have to make it so that it is,

(Speaker 1)
you can have a debate without it being personal, right? You have a debate, you disagree, or you have different points of view about some strategic action, whether I should advertise on billboards, but then you can go out and have a beer afterwards because you’re still friends, right? You still like to work with each other even though you don’t. So it takes a very strong leader and a thoughtful leader to create that environment for debate. And if leaders often leaders don’t even

(Speaker 1)
think about it, right, they don’t think how do I make sure that I get the best information possible, that I get different points of view in order to make the best decision. So it falls on the leader to make sure you don’t fall into that group think.

(Speaker 2)
Now, I want to respect your time, but I also want to not let you off the line or let you off the show without asking you the great question. The problem is I don’t have that great question. And I always get off the show and I think to myself,

(Speaker 2)
oh man, I should have asked Tim this. Here I have one off the show and I think to myself, oh, man, I should have asked Tim this. Here I have one of the legendary business valuation experts in the world. And I didn’t even ask him ABC or 123. So I want to ask you, because you’ve been on so many podcasts over the years and broadcasts,

(Speaker 2)
what is it on your heart that you want to convey to all of our listeners out there that are eagerly taking notes and really

(Speaker 1)
researching who you are today? I guess the thing I would want to convey and the thing that I find most disturbing about all sizes of businesses, okay, very small ones to very large ones, is the short-termism that has often crept into thinking, right? And one of the things that I find that I always do is sort of think about, okay, if we take this action today, if we wanna make our earnings target this year, so we’re gonna cut our product development this quarter

(Speaker 1)
in order to make our earnings target, what are the consequences of that next year and five years down the road, right? And so I think people often don’t think through enough the consequences of their decisions in the short term for the long-term health of their company.

(Speaker 1)
And I think if more companies did that, they’d be more successful, right? If you look at, and as a result of that, they’d be more successful. If you look at, and as a result of that also, entrepreneurs are very good at that. And the good thing is in our economy, we have plenty of entrepreneurs.

(Speaker 1)
If you look at the packaged goods, packaged foods industry, and you look at innovations like Greek yogurt, like iced teas, like alcoholic seltzers, right? Those weren’t developed by big companies. Those were all developed by entrepreneurs, right? Eventually, some of them were bought up by big companies.

(Speaker 1)
And the problem is, why is that? Big companies don’t innovate because they are a little too much focused on the short term. And even if you’re a small business, right? If you’re a music business, right? You have to be thinking about, okay,

(Speaker 1)
I can’t take shortcuts to make my profits look good this year because if I do something that reduces the experience of the student who comes in, right, word will get around and I’ll get fewer students in the future, right? So I do need to make sure that whatever I’m doing

(Speaker 1)
with the business today is going to help the business in the longer term as well.

(Speaker 2)
Now, Tim, you’ve got this incredible book here. I’m going to pull it up on the screen so people can see it. It’s called Valuation. Again, this is the eighth edition, Valuation, Measuring and Managing the Value of Companies. Whether it’s a small company, a big business,

(Speaker 2)
whether you have a startup, whether you have an existing large company that’s been around for a long time or not. I encourage you to check out this book today. I’ll put a link on the show notes so everybody can go check out the link and learn more about this incredible book, the eighth edition, which is now sold over a million copies. Tim, I’ll give you the final word. I kind of view this broadcast as your broadcast, so I’ll give you the final word, final 30 seconds. Sir, Mr. Tim, what say you?

(Speaker 1)
Well, first of all, don’t be intimidated by the book. It’s 900 pages, which sounds horrible, right? But it’s more like a cookbook than a novel. You don’t need to read it from beginning to end. You can read the first 80 or 100 pages to get a good sense of that.

(Speaker 1)
And then you dive into other things that you might find interesting. So it’s not as intimidating as it seems. And it’s actually, I would argue, and I’ve gotten a lot of good feedback, especially the first six or seven chapters are written for somebody who doesn’t

(Speaker 1)
have a lot of deep technical experience.

(Speaker 2)
I just, again, I talk to so many small business owners. I’ve been doing consulting for over 20 years and I just, I see people that have such a rosy perspective of the value of their company because there are charlatans out there that will, if you pay them enough money, they’ll tell you that your company is worth

(Speaker 2)
whatever multiple you want to tell them it’s worth. But then when you go to sell the company, you’re greeted with the harsh reality of the idea that you’ve just paid someone a lot of money to tell you what you wanted to hear, but it’s not true. And so if you’re saying, Clay, I want to get a book from the guru, from the expert, from the Yoda, it’s like a young Harrison Ford with the wisdom of Yoda, is how I would describe Tim Cullors. So Tim, I appreciate you so much. I appreciate your book. Everybody check it out.

(Speaker 2)
I hope you had a great time on today’s show, sir, and we’ll talk to you soon.

(Speaker 1)
Thank you, Clay. It was great. I enjoyed it.

(Speaker 7)
Bye-bye.

(Speaker 6)
Whoa!

(Speaker 2)
1980 was the year of my conception From the dorm room found a DJ connection Entrepreneur of the year in 07 On my path to the top I’m third in adolescence Kicked out of college writing a parody rap A dissed ORU liking Trump and Rosie McCaff I’ve been known for getting stuff done Not giving a crap in the jogging of wins So where my competition at? Nowhere does the Thrive Time show on your radio Catch the broadcast or the pockets download

(Speaker 2)
If you got a business we’ll help it grow God’s got a plan you just didn’t yet know about Workflow, systems, scripts and hiring Motivating yourself when you need inspiring These faces are made for radio and not TV Talking everything from plate to Z

(Speaker 2)
Automatically makes haircuts and glasses You want to sell we’ve already sold it to the masses No classes or prerequisites Just business school as raw as it gets

(Speaker 4)
It’s a thrive time show on the radio Yes it is, oh, yeah It’s all about you, all about you, all about you, all about you, all about you Said we bring the boom

(Speaker 2)
Yes sir, it’s Ian Clay, broadcaster from the Fox and the 918 Business school in the topic today, check the syllabus that’s getting you paid Making the business boom is what we do, you can do it, let us show you I’m a father of five with maniacal focus To teach the proven moves, no hocus pocus Cause getting rich quick is not a move But the proven system will make your life improve

(Speaker 2)
See I’m more than just a rhymer, like a horse with binders Focused on the thrive time show, that’s where you’ll find us He be the Z and I be the C Teaching business skills from clay to Z We both grew up poor but we’re poor no more The goal of this show is to help you score I couldn’t see the light until my son could see But I learned to rock the mic in the high school scene

(Speaker 2)
A young DJ with a billion dollar dream Numb to the pain that rejection brings So I, like a sod farmer, sweated for that green Now I’m on your radio with a thank you and please Share this podcast with a friend and a mean

(Speaker 4)
Now let’s talk some business from plate to seat It’s a drop-down show on the radio Yes it is Oh, yeah It’s all about you It’s all about you

(Speaker 6)
Said we bring the boom so so Bye!

Transcribed with Cockatoo