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The Amazing Authorities Podcast
Business Valuation Secrets Every Owner Must Know: Deal Structures, AI Risks & The Real Drivers of Company Value with Dave Bookbinder
00:25:22
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- [00:02]
A
Welcome to the Amazing Authorities podcast where game changers, visionaries and category leaders share how they built their brands, platforms and global influence. Your host is Mitch Carson, international speaker, media strategist and creator of the Instant Authority system. If you're ready to learn from those who've done it and want to become the go to expert in your space, you're in the right place.
- [00:31]
B
We are here with Dave Bookbinder. Now here's what's interesting. His name is not by accident, he just dropped his third book. I'm sure he's had that joke said about him his whole life. But Dave is here from the USA and I'm calling in from Thailand. So Dave, welcome to the Amazing Authorities podcast show.
- [00:54]
C
Great to be with you. Thanks for having me. And, and you're right, it's not the first time I've heard the bookbinding joke. Early in my career as an investment banker, as a junior analyst, we had to put together pitch books and offering documents and they were bound in this little velo binding machine. And the leadership team got a real big kick out of telling me, hey Bookbinder, go bind the books. They thought that was hysterical. Like you'd never literally doing it.
- [01:16]
B
Like you'd never heard that before, right?
- [01:19]
C
But there I was literally doing it, binding the books.
- [01:23]
B
Well and it, the irony is here you are, you're a three time author and I'm sure usually people can get one book out, they scratch that itch. Few of those, it's almost as though people get their bachelor's getting a book done. The master's degree people are a smaller group. And then you know, the multi book, you've written three books, my hats off to you. That's a, that's an elite club.
- [01:49]
C
Well, I appreciate that, but in all fairness, I never intended to write any of them. They were passion projects and things I just needed to do to get messages out. So for that reason they were a labor of love, they were easy.
- [02:03]
B
Did you write them for credibility purposes? Was it credentializing who you are and what you do, Dave?
- [02:11]
C
Yeah, there's a component of that for sure. Like I said, the real intent was to get a message out there. The first two are really about driving an important message about how to think about treating your employees and how they actually drive business value. And then the third one is literally called evaluation toolbox for business owners and their advisors. Because working with business owners throughout my career, I've come to realize that most of them don't know what they don't know when it Comes to actually what drives value in their business. They get a lot of bad info on the Internet. They hear a lot of information at their golf clubs. They don't know what it means. So I literally just felt compelled to put this thing out there for their benefit. Let's see that first book, the one I'm talking about right now. That's the valuation toolbox. I don't know if you can see that.
- [02:59]
B
I can. Evaluation. Yeah, yeah, it's right there.
- [03:04]
C
Yeah. So that's the most recent one. If you're looking at the, the Amazon profile.
- [03:10]
B
And what, what do you cover in that book?
- [03:13]
C
It's everything that relates to valuation in easy digestible tools. So I'm actually working on a. We'll call it a second edition where I'm uploading another five or six chapters to this because there's more information. But what's my business worth? People don't understand what drives their value, how to think about measuring value. What are some of the common mistakes that people make? There's a chapter on if you're thinking about selling your business, what's the best way to think about that? Hidden value drivers. There's a whole host of things in there.
- [03:44]
B
I had to sell. And I'm going to bring up a personal situation. Back in 2006, I started on my divorce. I was married to an attorney living in Los Angeles at that point. I had an advertising agency that was extremely profitable at 47% gross margins, which is very high in the industry. And I had to sell it because had to pay off. It was all part of the divorce, you know, the dissolution of the marriage and the paperwork hassle. And I have an mba, so I know numbers fairly well. It's not my strength. Marketing was more my lean in channel than finance. But the amount of work that went into getting it ready to sell, oh my gosh, it broke my back. And I finally did it and I learned a ton. It was sold to a publicly traded company called Halo Branded Solutions. And they put me through the laundry. They were doing their job. But I thought it was almost abusive how much information I had to reveal because they were publicly traded, they had to dot their eyes and cross their T's.
- [04:57]
C
Yeah. And part of that whole process that you learned the hard way is how to become ready for due diligence. And I, I always tell people that selling your business, while it is a transaction, it's really a process. And if you have, oh my gosh, benefit of time, you can be better prepared to do those things so that you're ready for diligence and you can put your best foot forward.
- [05:18]
B
Well, it was almost under emergency conditions because we were, it was at the beginning of the, the huge financial crisis, you know, the mortgage crisis that began. So I had, it was a five year buyout and I received a down payment and I didn't get any more payments because revenues had declined and there was a clawback provision which I'm sure you're familiar with all these. So I got no other papers. Wasn't their fault. No. No pointing fingers. I have nothing but nice feedback for Halo branded solutions. They're, I think a billion dollar sales now. They've really grown. They were nice people, did their job, they schooled me and I learned a lot in the process. And what, what does someone have to do to be ready for that?
- [06:12]
C
Well, it's first of all setting an intention that you're going to do this at some point in time. A lot of business owners never really think about the ultimate end game, that there's, there's going to be an issue, right?
- [06:21]
B
Yeah.
- [06:21]
C
At some point. So you can either do it the right way on, on your terms or the wrong way where it's rushed and you know, somebody's ill, somebody dies. There's an argument between partners. So being prepared to do it is the important thing. But I want to highlight one of the things that you just referred to in your personal situation. That's something I talk about a lot too. And valuation is important. Sure, but you don't necessarily need to get the last nickel. What's really important is how's that thing structured and can you get enough so that you can maintain a lifestyle over time if the money is managed properly. What you experienced was there's things called like an earn out. Right. So the course of time your consideration for the business is paid over, as you said, over maybe a five year period on an annual basis if the company hits certain targets. So there was probably a larger valuation associated with that. But there's more risk in achieving those payments because of the uncertainty in the earnout. So just a highlight for your audience if they're thinking about selling a business. The structure matters as much as the.
- [07:20]
B
Valuation out of the deals. I would imagine if you're the seller, you want to get all your cash and not have an earn out. But if you're the buyer, you want to have as long and earn out as possible. And I was exactly in a hard place. He negotiated the, the CEO of Halo a five year burnout and I got a decent cash down Payment and. And then I never got another payment because there was a 20% clawback, meaning if it. If sales had reduced by more than 20% from the original final year, I wouldn't be entitled to any money. And that's what happened. It was a bad situation for me.
- [08:03]
C
Yeah. A lot of times business owners are lured by the idea of the second bite at the apple because they're confident in their abilities to drive sales or drive margins and so forth. But a lot of times what happens is once they're integrated into new co and the acquirer, they don't have as much autonomy and control over their circumstances. So they don't necessarily always hit those targets.
- [08:26]
B
Well, they don't. And also one of my largest accounts when they took over was fragile and the. One of the people inside did not take care of this. And that was enough to skew my payout. They were there a million and a half dollars in revenue and that spilled over and put along with the economy and I had no recovery at that point. It was just some individual got rude with this, with this particular group of clients, and I suffered badly in my wallet and I needed that money at that time. So I wish I had had some good guidance. Man, why wasn't your book written back then? I was 2006.
- [09:13]
C
Gosh. A little late to the game there. Sorry, bud. But better late than never, right?
- [09:19]
B
I think. Well, it's. You learn later. And what. What motivated you to get into this line of work? I mean, it's all also about creating legacy, isn't it?
- [09:29]
C
Yeah, that's what I tell my kids, that at least on my tombstone you can say he tried to make a dent in the universe with regard to the new ROI stuff anyway, and I know we're going to talk about that, but how did I get into the valuation world? Yes, sort of. Also by accident. I was going to MBA school at night while working during the day and looking for.
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B
Where are you calling in from, by the way? Where are you located?
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C
Just outside of Philadelphia.
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B
Okay. Okay.
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C
East Coast. So. Yep. So I was going for my masters at Drexel and working at the IRS during the day. I knew I didn't want to stay in the government, so doing the job search thing. And I found an ad on the bulletin board for a company that was doing this thing called valuation consulting and it sound. The job description sounds a lot like what I was learning in MBA school. So I threw my hat in the ring, applied, and that's where it started.
- [10:20]
B
And how long have you been on.
- [10:22]
C
Your own I'm not on my own. I'm actually with an accounting firm called Heathley Flanagan, and I've always been inside an organization. I thought about hanging the shingle. Did it for about 15 minutes, but. Really, like being a part of an organization.
- [10:37]
B
Well, no, there's something to be said for that, but you were part of a very large organization that has three letters. That just scared the poop out of me. Irs.
- [10:47]
C
You had nothing to do with taxes, though. I was actually doing some computer programming for them back in the day.
- [10:54]
B
Oh, okay. Yeah. But when. When people mention the IRS is, you know, the. The back goes up. Yeah. And.
- [11:03]
C
Yeah.
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B
Should we file our taxes on time, or do you want to do a late return? You know, that's what always discuss about the irs. You don't get audited.
- [11:13]
C
Yeah. All I knew was that. That that wasn't what I wanted to do as a career, and I was going for something completely different and going for my MBA program. So that's what drove the whole thing. So wound up doing valuation consulting. Then from there, that was a springboard for me into the investment banking world. Starting as a valuation guy and then working my way up the corporate finance food chain, where I did all the sexy stuff, you know, the mergers and acquisitions and raising debt. Um, but came to the conclusion that valuation was really what turned me on. I found it more intellectually gratifying. So from there, I just got professional designations and haven't looked back.
- [11:46]
B
Oh, okay. So are you a cpa?
- [11:49]
C
I am not. Some of my best friends are, though. MBA in finance. And I've got two professional designations with the American Society of Appraisers.
- [11:59]
B
Okay, so that. Those are the. Yeah, there you go. And did you. Out of the. The companies that you value, that you conduct these valuations, are some of them divorces, like my situation? You have to come up with this in order to find out what the value is. So Peggy can separate from Bill in a. In a fair manner, or is there a lot of fighting?
- [12:24]
C
That's. That's one of many reasons why companies need to get their businesses valued. That's the dark side. So it could be a personal divorce, like what you went through, but a lot of times it's business divorce. I'm working right now on probably three or four engagements where there's lawyers involved because we have two parties that disagree on what the value of somebody's shares are in a buyout situation. So more like a business divorce.
- [12:50]
B
Okay, and then how do you come up with workable numbers? Because they're going to have their valuation guy or individual that says it's worth this. And then how do you split those. Those theories?
- [13:06]
C
You highlighted one of the biggest challenges when you're doing this. And the key is to try and get the same access to information so that both sides are seeing the same things, but more importantly getting the same narrative. Because the, the real disconnect is when you have two parties. One usually is thinking that the business is going to the moon and the other one thinks that the business is going to hell in a hand basket. And that's where your divergence in value is going to come from. Because what's the trajectory? We can all agree on what history was, right? Numbers are what they are, ostensibly. But valuation is a forward looking exercise and you've got to get those future estimates right. So narrative is important and I would.
- [13:46]
B
Imagine there are a whole host of variables that would affect that future performance or anticipated future performance. It's really anticipated. Or projected performance.
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C
Exactly, it's projected. So there's, there's risk in achieving those projections, of course. So the underpinning assumptions have to be fully vetted and understood.
- [14:08]
B
All right, I'm going to bring up something that's quite current and it is affecting most facets of business today. How does AI factor into what you're doing.
- [14:19]
C
Right now? I would say not a lot. I think we're in the nascent stages in my profession because we're, I'll call it regulated. We've got authorities to report to and valuation reports are usually scrutinized by the IRS, the SEC, large accounting firms, etc. So there's a lot of eyeballs on what we do. But I think the biggest convenience right now in AI is document summary. So it's a, it's a trust but verify situation. Because I can tell you my own personal experience in playing with AI and helping for tweaking profiles for LinkedIn. For example, it hallucinated that I had a fourth book. So you do have to be very careful about your, your faith and trust in it. But it does help to streamline processes like that.
- [15:05]
B
Well, for ex, I use chat GPT all the time and a couple other tools using GPTs to help. It's a tool. What would happen if you dropped in the scenario of Joe's Plumbing and Joe and Bill's Plumbing. Bill wants to leave. Joe has the first name and he's going to stay on. And you drop in their financials for the last five years, but they've been flat for the last three years. Their sales haven't gone up and they're still doing 2 million bucks, which is a, that's a decent plumber, I would say. Small business. And you drop it in the chat GPT, what are you going to get.
- [15:48]
C
In terms of valuation? Yeah, it's going to be insane. I can tell you right now. One of the banes of our existence in the valuation profession are these online calculator tools. So before ChatGPT, and there's a bunch of them out there, I'm not going to name any of them and throw stones, but it's a similar construct. Right. A business owner for free can enter in a couple of data points from their historic financial data, make some estimate about what they think a growth rate might be going forward, and they push a button and you know, the day later they get an 18 page report that tells them what their business is worth. I've vetted and played with a number of those calculators. I can tell you, you know, garbage in, garbage out. And, and if you don't know what you're doing, it's a dangerous tool if you just take it as a. For shits and giggles, so to speak. What, what's my business worth? Maybe sort of, kind of back of the envelope. Am I caveating this enough for you?
- [16:42]
B
Yep, yep, yep, I got it.
- [16:43]
C
Then maybe you can work with it. But if you're trying to do anything serious around value where you're looking to maybe gift chairs to your kids or grand stock options or dare I say buy or sell a business. No, no, no, no. Run.
- [17:00]
B
Well, I think of how people just pick numbers out of the air without any science. And sometimes when I hear people make statements, well, my mom said, well, based on what? Right, based on one. And sometimes when I have used chat GPT. Yeah, you have to have an eye open. It isn't the be all end all. It's fantastic. It shortens the cycle. But as you do, what you do is I would imagine a lot of objectivity and then you've got a layer of experience that has to factor.
- [17:41]
C
Yeah, there's a lot of rigor and judgment that goes into what we do. And when you talk about people getting information, I find a lot of business owners are on the golf course. Right. So they're talking with other business owners.
- [17:52]
B
Oh boy.
- [17:53]
C
Yeah. And, and Fred may tell Joe, I just sold my business for 10x. Joe doesn't know what that means, but knowing Fred, he's pretty damn sure he can get 20x.
- [18:03]
B
Okay.
- [18:04]
C
So there's just a lot of that. And we don't even know for sure that the 10x was, was legit. If he's just, just talking smack. There's just so much bad info going around you. You have to do your own homework and do your own diligence.
- [18:18]
B
Okay, well, we're, we're in September 2025. Where do you see businesses going in the U.S. it's almost a, a political question slash thing is objective is what's your lens tell you, man?
- [18:35]
C
My crystal ball is not that good. But I will tell you from experience, the trajectory is always upward. Okay. I've been, been around long enough to have been through recessions and crises and so forth and we always rebound. We are resilient and I don't think that's going to change.
- [18:53]
B
I would tend to agree. And also this administration has three more years and then we're off to a different administration and then they're going to complain and do this. I just think it's an interesting time.
- [19:05]
C
In America, that is for damn sure. And I, I'd probably need a bourbon and a lot more time if you wanted to go down that rabbit hole. So my instinct is I probably shouldn't.
- [19:15]
B
Okay, well we don't, we don't need to. We'll do that after if we choose to. Does crypto, how do you value crypto when, when you have that? That was what I wanted to ask you. Let's say the company owns X number of shares, there's an investment account, and then one of the assets listed on the balance sheet is Y number of Bitcoin, which is a well known crypto. Or one of the others. Ethereum, I think is the other. I don't own any crypto. I don't understand it. And I was a stock broker with Merrill lynch, you know, 35 years ago, I was, I was on the floor. But I don't understand crypto because I don't know what's behind it, what's underneath it. I don't get it.
- [20:02]
C
Yeah, you're absolutely right. And there are two industries that I don't touch. One is crypto and one is cannabis. Why I don't understand crypto. I, I, I don't want to editorialize about it, but I think I agree with where you're generally coming from. I don't know that there's there there. So if you see a number on a balance sheet, somebody has reported it, right? There's a statement that comes with it. But yeah, I'm, I'm not a big proponent of, of crypto.
- [20:32]
B
And why not cannabis it's always been.
- [20:35]
C
Just a regulatory thing. The firms I've been with have tended to shy away from that. I think it's more mainstream now, but it's not something that I've touched historically just because of that circumstance.
- [20:46]
B
Okay, Dave, show us your three books. I want to give you a little traction here because a multi book author is a big deal.
- [20:54]
C
All right, so you saw the Toolbox book. This is where it all started for me. This is my first book, the new roi Returning Individuals.
- [21:00]
B
Okay.
- [21:02]
C
This is my attempt to take the journey to really prove that when every CEO on the planet says your people are your most valuable asset, that it is in fact true. This is a follow up, it's a mirror image. But it's the new ROI going Behind the Numbers and the compendium of the conversations I've had on my podcast, behind the Numbers, where I've talked to leaders about instilling culture change and what that's meant to retention, what that's meant to profitability, what's that meant to business enterprise value. And then as you already saw the last one, the new one, the evaluation toolbox for business owners and their advisors, just lots of little nuggets, easy, quick read for again, business owners and their advisors who want just to get a little bit smarter about the concepts of valuation.
- [21:50]
B
Awesome. Awesome. And you have a podcast.
- [21:53]
C
It is called behind the Numbers. That is correct.
- [21:56]
B
All right. Behind the Numbers. And you've, I mean, you're prolific. You have had 300 episodes coming up.
- [22:03]
C
On the 300 milestone in two weeks from this recording day, I'll be dropping Episode number 300. Yeah. When I first started this, man, I never could have imagined that it would be going this long. But we're listened to in more than 100 countries. Listen. Note says we're in the top two and a half percent of shows globally. And out of the blue, in a couple months ago, I received two awards for best in category from a couple of independent agencies who do those sorts of things. So that was pretty cool.
- [22:34]
B
And where do you get your guests?
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C
They actually come to me. In the early days, I was sort of pimping my network for friends just to come on and do me a solid and be on the program. But now I'm on a couple of call them the podcast dating sites. You know, that. Where the algorithms match guests and hosts. And because the show has been around for so long, I get pitched by publicists and authors and individuals a lot. Knocking on wood here. We're still booking more than a year in advance. And have been for the last couple of years. Wow. That. That gives me the chance to say no a lot, which is really cool because I only like having guests on the program where their topic really resonates with me. And apparently it resonates with the audience too.
- [23:19]
B
So one guest a week, you upload.
- [23:21]
C
Yes, sir.
- [23:22]
B
Okay.
- [23:23]
C
That's correct. That. That's the cadence we record on Wednesday mornings and then they usually drop it the following Wednesday.
- [23:28]
B
Okay, so you just do one episode a week recording. You don't stack them?
- [23:33]
C
No, no. In the earlier days, where just coincidentally with reschedules, I may have had two or three in the queue. So if I interviewed you today, for example, we may not drop that for several weeks, but I find if I can just keep the regular cadence, one a week, and it works out that way, that's perfect for me.
- [23:50]
B
Wow. Sounds good. Well, Dave, you've been a great guest. DaveBookBinder.com is your website.
- [23:56]
C
No, no, no, no, no.
- [23:58]
B
Okay. Just want to make sure.
- [23:59]
C
No, close. It's newroi.com if you want to learn more about the books, but I would say best way for people to find me is on LinkedIn.
- [24:08]
B
Dave Bookbinder. You can't forget that name.
- [24:10]
C
It's.
- [24:11]
B
That is so. I don't. I don't want to tease you. You have. My God, you had that as a. As a kid, but when you were at. On the job, when you were binding books, that must have just been a historic moment.
- [24:22]
C
And Mitch, I'm from Philly. There's. There's nothing you're going to say that's going to rattle me here, so bring it.
- [24:31]
B
I don't want to mess with the guy that worked for the irs. I want to have you as a friend and you've been a great guest. Dave, thank you so much for your time today. Amazing Authorities. Dave Bookbinder. If you want a value Asian on any of your properties, go grab his books today and they're up on Amazon.
- [24:51]
C
Thanks for having me.
- [24:52]
A
Thanks for tuning into the Amazing Authorities podcast. If today's episode inspired you, take a moment to submit, subscribe, rate and leave a review. It helps more experts like you rise to the top for behind the scenes access and free resources to boost your authority. Head to MitchCarson.com until next time, stay Amazing.