Welcome to episode 23 of The Executive Edge. This week’s guest is Bharat Kanodia.
Bharat has been in business valuation since 2000 and has valued assets in real estate, industrial, personal property and financial assets including some unique assets i.e., the Golden Gate Bridge, NYC subway system, Hartsfield Atlanta Airport and Las Vegas casinos.
He is also a successful YouTuber with a fantastic channel that provides insight and help for people who are counting on selling their business for sustained retirement.
On the show he discusses how appraising the value of a business is much the same whether he’s talking about a large retail park, or a small grocery store.
His You Tube channel ‘Whatsitworth’ has many fascinating videos which were the subject of our chat. Bharat explained that people want their business to be valued for four primary reasons. Among them, there is the requirement for tax purposes or rather like a precious piece of jewellery, it can be important for insurance purposes. Often the date of the valuation makes a big difference too, something I didn’t realise until we spoke. Valuing a building for example can be quite different one month and alter immeasurably the next, if a world event such as a global pandemic, has taken place in between.
So how does he do it?
Bharat takes his time to evaluate a business by asking significant questions of a client. It is through these questions that he determines the influencing factors for that industry sector. These help him work out how well the company he is talking to, is doing within that sector. To maximise the value of your business, it can be important to do two things. The first is maintain consistent cash flow. No-one will want to buy something where revenue is erratic.
Recurring revenue ensures that the purchaser is buying a successful business. Whilst this might seem obvious at first, what didn’t seem so obvious to me is the fact that a buyer doesn’t want to do anything once they’re in. This is pertinent to people I’ve coached before, as they can often confuse activity with productivity, and not realise it’s better for them to be doing fewer hours. That’s because it’s a direct measure of their ability to step back and out. It also means that you as the seller have worked out what your purchaser is really buying. Are they buying a business with you in it, or are you planning on leaving too?
The other less obvious point is to appreciate that systems and processes are best when highly automated. Streamlined systems make for easy transportation of goods, or from the order process to production. Something perhaps many of us take for granted. Yet it’s easy to get wrapped up in the problem solving and decision making of your day rather than step out and see it through the eyes of a potential purchaser.
He explains that the kind of issues he explores include recommendations that in their own way could act as a catalyst for positive change. We are reminded of the things customers really want, such as ‘are you following the trends in your sector?’ Are you applying current technology? What about simplifying processes, and easy shipping?. These are what he uses as benchmarks, and ways to leverage the value of what you do and how.
If you would like to hear more from Bharat you can subscribe to our podcast on iTunes, Spotify, Google play and iHeart.