Ben Isakov talks about building transferable value in your business, as well as planning a successful exit.
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Sean Corbett:
Hello again everybody. This is Sean Corbett with Websites.ca Marketing. Today we’re going to talk a little bit about your business value. I’m joined by Ben Isakov. He’s a business breakthrough strategist and exit planning advisor with Congruent Clarity. So what he does is he helps business owners build and preserve transferable business value, then exit their business, maximizing the bottom line cash after the transaction. Ben, thanks for joining us today.
Ben Isakov:
Thank you very much, Sean. Thank you very much for you and Websites.ca for bring this series.
Sean Corbett:
Yeah, for sure. Well, before we get into the topic, Ben, I was hoping you could just tell us a little bit about your background and why should people come to you and listen to you about this topic?
Ben Isakov:
Yeah, okay. Well, to make the long story short, I’m a mechanical engineer. I never worked as a mechanical engineer though, but I’ve spent over two decades in quality assurance, continuous improvement in antenna operations management roles. And before I decided to open my own firm, I had the opportunity to work in different environments. I worked for government and military organizations, large corporations and family owned businesses. All these gave me the ability to see all the pros and cons of these different structures and to pick and choose what are the best practices that are working the best for a specific application. At the core, I’m a systems guy and I consider my superpower to see business as a collection of separate processes, identify which are not working, and explain it in a simple understandable way so the owner can fix it. And that is how we create the breakthroughs in the business.
Sean Corbett:
Interesting. So have you dealt with a lot of times where an owner thought their business was worth a certain thing only to find out when they went to sell it or exit that actually THEY were the intangible value, and the business itself was not set up to really be valuable to the next purchaser or the next investor?
Ben Isakov:
That is so true. That happens all the time over and over again. There are a couple of different ways that business owners can got hurt when they decide to exit, but that is probably the biggest one, when they think that the value of the business is way higher than the potential buyers are thinking. And don’t get me me wrong, it’s not that there is no value in the business, there is, people work hard to build it, but in many cases what I see is, and my colleagues as well, lots of the value of the business is on the shoulders of the owner, their ability to run the business, their connections, their unique skills and experiences.
So all of this adding a lot… Running the business, at the end of the day, they are the decision maker takes them out of the quotation and the value of the business drops significantly. And I don’t know if you know or not, but based on the study done by CFIB, the Canadian Federation of Independent Business, over 56% of owners struggle to find qualifying successors/buyers. And for that exact reason because they’re hard to replace, they’re wearing too many hats.
Sean Corbett:
And so you said earlier, you described yourself as a systems guy, I would imagine… I always like to ask all of our guests, “What is the biggest misconception about your topic?” And I’m just going to take a wild guess and say that people come in thinking they have certain a intangible assets and you’re probably going to come in and tell them, “Yes, but we have no systems so that we could swap you out, bring a new person in and have the whole thing run accordingly.”
Ben Isakov:
Oh yeah, yeah, that’s exactly. You are absolutely right. Yeah, it’s enough to speak to certain amount of business owners about their problems and this problem will pop up on you right away. Yeah, we know what there is a reason why it is like that. Business owners, entrepreneurs in general, they decided to be in the business because they wanted to do things the way they want to do, the way that they think is the right way to do it. And they build the systems and they build the business around their capacity and around their ability. And each one of us is different. So if you are taking this custom build around your business and you want to fit it around somebody else, it’ll not always work. Yeah, exactly like you were saying, what I’m doing is I’m saying, “Okay, well let’s make it all size fit all kind of thing. Let’s wrap it up with procedures, streamlining the processes, and make the business less business owner-centric.”
Sean Corbett:
And does that require a lot of documentation on your part in creating procedures and so on?
Ben Isakov:
Well, if you remember my background in quality assurance, and I happen to be certified lead auditor for… I saw a 9001 series of standards. Yeah, procedures, and documentation are very important. I say this way: if you do something differently, each time you are doing that, you are incorporating too many variables, you are incorporating too many things that can go wrong and you are taking away the predictability of the process. And it is very important, especially in the business.
Sean Corbett:
Yeah, for sure. Okay, well, so with that in mind, making things more predictable and systematic and so on, could we identify perhaps a couple quick and easy wins that our listeners could do right away to improve and build that value into their business so that it’s not so dependent on them?
Ben Isakov:
Oh yeah, absolutely. There is a good example that everyone of the listeners right now can do. And it will require some time. It will require maybe like 15, 20 minutes of quiet time with yourself, and the most important, being honest with yourself. So it goes like that. Imagine you have to leave your business for three months unexpectedly without any notice. You just received the message, pack your stuff now and move out. That’s it. Now you’ve moved out in three months. When you come back, how your business would look like? Okay, well what is going to be the condition? Things will go wrong. Some of them will go wrong badly, some of them are not that bad. So what I want you to do is imagine this situation, kind of try to live through it to believe in it, and then sit down and make a list of all the things that can go wrong. And make it detailed every possible thing that can go wrong.
Write it down, list it down, write in one column. Second column, you can make it as, “Okay, what are the consequences? Okay, that what goes wrong, what is next?” So you will end up with a big list of things. So when you have the list, I can congratulate you because actually that can be basis for your improvement work. So what you do, you are taking this list and you are looking on each one of these items and you’re saying, “Okay, well how can I eliminate or reduce it?” So for example, simple example, I speak a lot about business continuity. As simple as banking passwords, banking accounts, passwords. If a decision maker is not around, something God forbid happened to you, business must run. Somebody needs to pay bills. If nobody except you has an access, guess what is going to happen to your business?
Sean Corbett:
Everything gets frozen. That relates a lot to us at websites.ca because when we’re setting up different accounts for people, sometimes you’ll get a website and then you’ll also get a Google account and so on. We’ll always keep one set of passwords, but then what we encourage the business owners to do is to find one other person in the organization they can give some of the key passwords to so that at least two people have admin access and have passwords for precisely what you said.
Ben Isakov:
Oh yeah, absolutely. Redundancy is the key in here. And I’ve heard lots of good stuff about websites.ca and the procedural base that you have behind everything you do. That is invaluable. Many businesses like yours will not do that, and it is such a simple fix for a future disaster.
Sean Corbett:
Yeah, okay. No, that’s a great example. Well then, so let’s talk about that. Someone, a business, you come in and you help them make a list of this stuff and you start to order it and go, okay, this is probably the most important thing we could tackle first and so on. And you tick as many of those variables off the list as you can. Could you tell us a story or two about a specific time that you helped a specific business?
Ben Isakov:
There is one that I like to share more often than others. A client of mine, still a client, we are still ongoing, small service firm, and he was pretty stuck in his business. And he was like… It’s a great business, good cash, really good solid cash flow, but he was wearing too many hats in the business. And when he decided that he wants to get out because 60 hours weeks are too much for him, and he’s like an older gentleman, he found out that nobody wants to pay for the business as much as he thinks it. So what happened is he was doing his sales, he was doing his marketing, and he was micromanaging his operations and nobody could do it the way that he does, especially on the sales side of it. So when we started working with him, what we did is I said, “Yeah, what maybe one person cannot replace you, but three people can.”
So we deconstructed his position into three different ones: sales, marketing and operations supervisor. So we worked on the definitions of each and one of these positions and what this position supposed to take care of, responsibilities, authorities and all of this stuff. And when he was happy with the definitions, we assigned the supervisor position to one of his team members, and we started to train him to do it. As soon as he started to delegate stuff and his team stopped coming… You know this? “Hey boss”. Every business owner will, “Hey boss.”
When we cut it down, when we cut it down, all of a sudden he started to have more time to close, more sales, generated more cash, some of this cash went into outsourcing the marketing, bring up more of his time, and then more cash started to flow in. And we hired a partial part-time salesperson, sales rep for his business, and he’s in training right now. So doing all of this created a condition when all of a sudden the business is not that much relying on him, but on his team. So we started to work on a couple of different things and of course the documentation of the operations, so we will reduce even further the hey boss kind of things. So yeah, that would be one of my best examples. That goes by the book pretty much.
Sean Corbett:
I’d imagine that’s a very big mental hurdle for most entrepreneurs to accept that they’re going to have to hire… Let’s say in your example, the salesperson example, it’s hard for them to accept they’re going to have to hire someone who can close 50% as well as they can and just be okay with that.
Ben Isakov:
Well, yeah, that’s true. That is super true. Often time people start businesses because they like to do whatever is the core competency for them. They’re passionate about it. They like it. Not as much as their team. One of the things that we often expect our team to have the same level of dedication that we are, but that’s our business not there’s. They are just employees. They can be super good employees, but they’re still employees. And yeah, we have hard time to delegate. If you know everyone is going by, “If you want it to be done, do it yourself,” but that is so wrong, so wrong. There is more ways from A to B that you can do. And I say the true delegation starts when you say somebody to go from A to B and you don’t look what exactly they are doing, and you only care if they’re at the point B at the right time, and that’s it.
Sean Corbett:
Yeah, no, that’s a really good point. And actually we’ve been talking this whole time about exiting the business, but I would imagine if you’ve got a younger fellow, let’s say somebody who does more of a manual type business where they’re on the tools. If they want to grow, they want to get that second truck or whatever it is, they’re going to have to do the exact same thing you’re saying right now. It doesn’t matter about selling the business, it matters about if they’re constantly out there on the tools every day, their business is never going to grow. They’re never going to get more equipment, more things and be able to multiply their time.
Ben Isakov:
Oh, absolutely, absolutely. That’s one of the things. I don’t like… It’s kind of like too popularized and there are different opinions about it. But if you think about it, when you are in the business, you can manage it or you can run it. If you run the business, you are not the business owner, you are just self-employed. And when you are self-employed and you do it all by yourself, you are not leveraging the most valuable asset that you have your time.
And when you say, “Okay, well you know what? I want to grow my business, I want to work on it, I want to manage it and not to run it,” you say, “Okay, you know what? Yeah, like you said, I’m okay to hire somebody that will [inaudible] 50% of my sales, but it still makes me money and I’d rather have this 50% and gain more of my time to do something that will leverage and generate me more money to me.” I speak, if you are familiar with the concept of $10, $100, $1,000 $10,000 per hour tasks. So you can spend your time on each one of them, but guess which one of them will generate you more revenue?
Sean Corbett:
Also guess which one the business owners will obsess about being done perfectly. It’s sometimes the $10 an hour tasks that they’ll obsess about being perfect.
Ben Isakov:
Oh yeah, absolutely. Coming back to the websites.ca, the amount of time that I myself will spend on trying to fix my website divided by the amount of money that you will charge me, will come up in such a low rate. And I’m saying, “Okay, well yeah, you’ve worked on your website all by yourself, you’ve saved 50 bucks. That is cool. What is your hourly rate?” “Well, what do you mean?” “I mean, yeah, how much money your business is doing in an hour?” “Well, $200, $300.” “Okay, well now you’ve fixed your website. You say you saved $50. I’m saying you lost $150.”
Sean Corbett:
Yeah, and that’s a hundred percent true. And it applies to things like: is the shade of purple the right shade of purple? And at a certain point you have to think, “Well, no one actually will notice that but you and it doesn’t matter. And you could have made money in the meantime doing something else.”
Ben Isakov:
Well, yeah, that’s true. Yeah, that’s true.
Sean Corbett:
No, that’s perfect. This is kind of a weird, out of the blue question, but just on this particular topic. I was dealing with as a contractor for a business owner once, and she had created her whole consulting business based around having contractors rather than employees. And when a business value specialist came in, they told her, “You should revamp your whole system and actually have a whole bunch of staff actually employees as opposed to contractors because that’ll add more value to your business.” It was just a random idea. I’d never heard that before. Is that something that you would generally agree with or does it depend?
Ben Isakov:
Well, it depends on the system. It depends on the system, and it depends on the way that you are outsourcing the stuff. By the way, there is a big difference between outsourcing and subcontracting. So first of all, was she outsourcing everything or she was subcontracting some of the work?
Sean Corbett:
It was closer to subcontracting because the idea behind it was that in her particular case, she was doing a lot of work with municipalities and fire departments, and so you needed credentialed people around as expert consultants in those areas. So she could be a generalized consultant, but what she would do, which was really smart, would go out and basically retain the services of five or ten retired fire chiefs. And then deploy them as needed so that they didn’t have to be collecting a salary when they weren’t doing anything. But when they were called upon, they were getting paid very handsomely for their time. And so everybody was kind of benefiting. But the way the consultant person looked at it, the business value consultant, is they were valuing all those people that she was using as zero because they weren’t around all the time.
Ben Isakov:
Well, I will disagree with that. It all depends on the contracts that she will have in place and the truck record. That’s pretty much it. You will look on the track record of the business for the last three to five years. You will look on the contracts of the people that are doing the jobs on their credentials. And if you can prove, or you can say, “Okay, well that is my repeatable small business model and that’s how I roll,” well maybe the person that did the valuation was not understanding the business model the right way.
Sean Corbett:
Okay, no, that makes sense. So if same thing with having plans and processes in place, if you have a contract with a retainer, with a expert subcontractor, that’s a reasonable thing that someone can plan into the future with, right?
Ben Isakov:
Well, absolutely. Think about it this way: a supply chain or key customers. Key customers are a very important portion of the valuation of the business as well, but they are not on staff. They can change things on you whenever they want unless it is not in the contract. But when you value the business, you will say, “Well, you know what? These are the contracts. They’re coming every every quarter. That’s what I do. This is our cash flow. That’s our prediction in this part of the evaluation.” So yeah, I’m curious why the evaluator was doing it this way, but without knowing much more information, I won’t be able [inaudible].
Sean Corbett:
That’s fair. And I might have misunderstood the explanation given to me too. So when we’re talking about the value of a business, do you also take into account, say the digital assets somebody owns? If they have a really robust Facebook following or they do have a really fancy e-commerce website or stuff online, does that kind of go into it or that doesn’t really matter that much when a business is being sold?
Ben Isakov:
Well, it does matter. My question always, and what I’m looking… I’m not evaluator. I’m not a professional business evaluator. I’m working with people, but I will not do it. My point is following. I’m all about numbers. If your website, and let’s back it back to you, if your website is converting, you have the track record, you have all of the analytics of the performance of it, you can say, “Okay, that number of money that I’m spending on my SEO, returning the investment.” And that is how much money I’m going to get, that social media exposure generating me that much traffic to my website, which can be directly translated to my sales. If you don’t have all of these numbers and you just have followers… I had an experience with a person, he has 1.5 million followers on Instagram. That is huge amount, huge. But when he told me, I said, “Okay, that’s fine. How many of them are your potential clients?” He have no freaking idea. So what is the value of it?
Sean Corbett:
Yeah. Go online and try to sell a $1 T-shirt to all of them and see how many of them buy.
Ben Isakov:
That’s right.
Sean Corbett:
That’s a fun experiment. No, that’s great. Okay, so again, we have to be clear in our thinking here. It all comes back down to systems. Whether it’s the system of us doing Google ads every month to spending X to make Y, or whether it’s the system of every year a painting company prints out this many flyers and distributes them in the neighborhood. If they can demonstrate that this system is set up, codified, proven out over time, then of course now we can start assigning a value to it and that’ll help with our sale.
Ben Isakov:
Absolutely, absolutely. And then again, it comes back to the predictability. And when you have a business process streamlined and documented, you create predictability.
Sean Corbett:
Beautiful. Now what I’m thinking, Ben, another issue that entrepreneurs have that you already mentioned is they never have enough time and they have to run the day-to-day operations of the business and they have to do the things that bring them in the most revenue. So even if we give them the best advice right now, they’re probably going to turn around as one of their main objections and say, “Well, I can’t stop the other stuff I’m doing to sit down and plan this stuff out that Sean and Ben are telling me about.” And I think that’s maybe where you come in and you could possibly help people.
Ben Isakov:
Oh yeah. That’s the classical don’t have time to sharpen the soul. I have a prime example, a past client of mine. Imagine super, super, super cool guy, tactical, running a couple of businesses all at the same time. I wish I had a quarter of his capacity to run so many things, all at the same time, really, I wish. He was struggling with the business in general because again, he never had time. You know what time… Okay, first of all, there is a myth. There is no time management. You cannot manage anything that is not under your controls. You don’t control time, you control tasks, so tasks management.
I started to push him toward documenting what he does during the day. And long story short, he was spending tons of time on the phone. We started to dig further into it and we incorporated two changes, two reoccurring weekly meetings with his teams. And one phrase that he was saying when he was picking up the phone, “Can it wait until Friday’s meeting? Yes? Okay, goodbye.” Sean, 44% of his time back to his pockets, 44%. I have the Excel spreadsheets, it’s unimaginable. I was blown up. I was not expecting that much myself. Sorry, to wrap it up, we have lots of activity that should not be done, but we perceive it as done. I would say, “I’m going to post a video about Eisenhower metrics and four quadrants, based on the importance and urgency.” I will send it over to you as well. I really encourage people to look into Eisenhower metrics. It’ll help to mitigate this problem.
Sean Corbett:
Perfect. Okay. Well, so if someone wants to go through the process of hiring you, how would they do that?
Ben Isakov:
Well, there are a couple of ways a person can reach out to me. First of all through LinkedIn or to my website registration form or through my email, or they can call my phone number. Now all of these channels are available. Once again, I am in the consulting space, so I want to be as available as possible to people. But what I would like to offer is something different maybe. I don’t know if there is a way for us to share the a link that I have?
Sean Corbett:
Yes, we can. Absolutely.
Ben Isakov:
That is fantastic, sweet. I’m following a specific seven step system. It was developed by a business exit institute back in 1996. Has specific concerns, deliverables for each step, and it works like… It is a methodology that I’m using. But it all starts with initial exit readiness assessment. So what I wanted to offer to our listeners is to go to my website and take the assessment. It is free of charge. It is interactive tool. It will take you though 3, 4, 6 minutes to complete, but what you are going to get is a score of 16 different business-related categories that will score your readiness for the exit. And it is a good starting point.
Sean Corbett:
Yeah, that would be great. Do you have the specific URL where I can send them for that?
Ben Isakov:
Yes, I do. I can forward it to you right away.
Sean Corbett:
Perfect. Okay. So we’ll put that in the show notes. And obviously I’ll get your phone number and everything there. That was congruentclarity.com, but I’m going to get the exact place you can go so you can do that free assessment that Ben set up.
Ben Isakov:
Yeah, that’d be great.
Sean Corbett:
That’s awesome. Well, last word goes to you, Ben. Is there anything else you want to say to wrap up this topic?
Ben Isakov:
Well, last thing that I would like to say… First of all, I want to thank you and Ryan to invite me to the show. It is a very important subject. And what I would like to say is: I cannot say that I don’t care, I do care if you do it with me or you do it without me, but I care more about business owners out there actually doing it at all. So go stop for a second, check out what are your options and examine it and try to plan ahead. Because I speak with lots of business brokers, too many people are coming to their doors and they have to turn them back because the businesses are not sellable. And it is too bad. We are losing so much good stuff out there. So please plan, please make sure that your business is staying around when you are not.
Sean Corbett:
Beautiful. Great point. Yeah, you should have done it yesterday, but the next best time to do it is right now.
Ben Isakov:
Absolutely,
Sean Corbett:
Ben, man, I really appreciate your time today. Thanks for chatting with us.
Ben Isakov:
Yeah, thank you very much.
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