Podcast: How Private, Mid-Market Businesses Can Avoid Leaving Money on the Table

By Noah Rosenfarb
Published: December 3, 2013 | Last updated: March 21, 2024
Key Takeaways

The average business has a 26% value gap. Think of it as the amount of money that you would leave on the table if you went to sell your company today. CoreValue is a proven framework to significantly close that gap.


In this podcast, Chuck Richards, CEO of CoreValue Software talks about:

  • The structure and process to successfully build valuable businesses;
  • The disconnect for private mid-market businesses between being profitable and being valuable;
  • How great companies are built on measuring success by enterprise value;
  • Private Business Standards for building an enterprise based on 18 drivers of value developed from research at MIT; and
  • The importance of building valuable, transferable private companies for the prosperity of many world economies.

About the Guest

After four startups as CEO and CFO, two turnarounds, and making the Inc 500, Chuck Richards formed CoreValue Software. Chuck has worked with owners of more than 50 companies to build value and deliver their strategic objectives, and has helped hundreds of CEOs of private companies as an advisor.


Over the past 30 years, Chuck has been at the forefront of private business research including leading teams to create the first comprehensive set of Private Business Standards, Normalized Industry Trading Ranges for private businesses and industry specific algorithms. Chuck has a B.A. in Economics from Williams College and a M.E. from MIT in Engineering & Business.

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Noah Rosenfarb: Hello and welcome! It’s Noah Rosenfarb, the author of Exit: Healthy, Wealthy and Wise and the founder of Freedom Exit Advisors. Today, we have Chuck Richards. He’s the CEO of CoreValue Software. And Chuck has been the CEO and CFO for four start ups, two turnarounds and he made the Inc 500 just once. He’s also worked with owners of over 50 companies to build value and help them grow. And so what I’d like to do is welcome Chuck to the show and have him talk about his journey. Thanks for joining us, Chuck.

Chuck Richards: Thank you, Noah. It’s a pleasure to be on the show.


Noah Rosenfarb: Why don’t you tell me first how this journey had kind of come about for you with startups, turnarounds and the Inc 500 and then we could talk a little bit about your latest project.

Chuck Richards: Okay, great. Thank you. I’m going to have to go back a number of years and then we go back to when I was in elementary school. When I was a young kid, I grew up in a small town of Vermont. At that time, it was the wealthiest town of Vermont. By the time I went off to college, it was the poorest town. In less than a decade, this small town of 10,000 people lost 5,000 jobs.

So I grew up in a world of economic pain. When I went off to college, the real question that I was pursuing is how can that happen? How can a wonderful, successful, dynamic little town basically collapse in less than 10 years?

That became my life mission. I ended up at college and was looking in through economics. I’ve studied economics and there were no answers there to that fundamental issue. I ended up going to graduate school at MIT. And at MIT, I was lucky enough to be working with folks who were in early days of applying process engineering-type thinking to business problems. We would think of the business as an engine and we would say, okay, then how can I make that engine run better. What kind of process engineering algorithms I could we apply to make it work better. And we’re off to crossing over at the time to Harvard, to the business school.

I had dreams of being an academic and that was great until my wife informed me that we do have four kids and we do need to feed them. And so my dreams of being an academic quickly changed. I ended up having to go out and feed my kids and that’s what led to the building of companies.

Noah Rosenfarb: What was this first area that you got up and started? How did you make that leap into entrepreneurship?

Chuck Richards: It was the classic leap of faith started by basically building a local business. One was a manufacturing company. Built it with a gentleman and making quality control equipment. At the same time, I was offered building a couple of retail operations. Out of that came more opportunities to build another manufacturing company so I started building a second manufacturing company. And so, one thing just kind of grew from another, from one company to the next because the opportunities were there.

It wasn’t like I was pursuing an industry or pursuing very specific kind of growth patterns. Back then, it was the opportunities that would present themselves – good people, good team – so we’re able to build some very good companies.

Noah Rosenfarb: We’re you thinking it all about value in those early days as an owner?

Chuck Richards: Yeah. It’s interesting when you’re using other people’s money to build companies, you always care about value. So we grew up, and I say we are teens, we were in our 20’s to at the time nearly 30’s; we grew up understanding that value was the measure of success. When you’re using other people’s money, if you’re not generating ongoing value and you need more capital, you do a down around. In the down around, the management team is the one that takes the hit. So we always were building company based on value. That’s the world we grew up in.

Noah Rosenfarb: And did you have early exits as you were serving companies?

Chuck Richards: We do. We exit it all. I take that back. We exited all about one. In one of them, we did exit but it wasn’t successful. We ended up, in essence, selling it for almost nothing. But the company continued on and someone else took it over. There are times when the marketplace goes left and you’re going right and those things happen.

Noah Rosenfarb: Out of those early exits, what would you say was the most valuable thing you carried with you and always want to share with owners, if there are any?

Chuck Richards: I think the most valuable thing that owners need to know is that creating value isn’t a black art. It’s not a mystery. That there’s a structure and a process to building valuable businesses; that if you follow a structure or follow a framework that you will be, you know, 90-95% successful in doing it because it’s not a mystery. So much of it, people think it’s a black art but really isn’t. It’s a process. It’s a process that anybody can follow if they care about the value their other business.

Sort of the most interesting thing is if you look at companies. If you look at companies that built based on value model, meaning the owners and CEO’s measured their success by the value of the enterprise; you get really great companies. You get well built companies. You get valuable companies. You get all the things that you always care about. If on the other hand you look at businesses over the long term that are built strictly on profit maximization thing, trying to maximize the profit; what you see is in the early days the businesses grow, they flatten and they tend to go downhill.

The fundamental reason is that profit is a backward looking measure. Imagine driving down the street if you’re always just looking in the rearview mirror – that’s what profit is – ultimately you’re going to get yourself in trouble. You need to look out the windshield and look forward.

Now profit is critically important. Finances are critically important. But they were backward looking measures. They’re not forward looking measures.

Learn the structured process to building enterprise value here.

Noah Rosenfarb: I think, unfortunately, a lot of owners they’re trapped in the, you know, “eating what they’re killing” and living a lifestyle based on their current earnings and they have trouble reinvesting in their business. So how do you suggest owners to get out of that way and look to value which oftentimes results in the erosion of cash flow, because you’re reinvesting but there’s a greater path than that?

Chuck Richards: Well, it’s interesting. There’s a fundamental disconnect. And I hate to sound like an academic but if you think about how we talk about business, we talk about the bottom line. We talk about profit being the measure of success. If you go to take a business course/class, go get your MBA, it’s all about generating profit. And as long as you’re profitable, “you’re going to be okay”. That’s true if you’re a public company. In our education, the way we think about businesses on a public company model, profitability does equate the value. So the management for profit makes sense.

But when you are a private company, there’s no direct connect between being profitable and being valuable. That’s what Noah you just said. If people use their profits to live on, they do those things but they don’t understand. It’s because we do a poor job of communicating to business owners and CEO’s that because you’re profitable doesn’t mean you’re valuable. That if you make decisions to increase your profitability over time, you may not be investing in the right thing. But at the same time you believe you’re doing fine because you continued to be profitable.

Okay. So half the information that an owner or a CEO needs to operate and build a business that has value and have longevity, they don’t have access to. And that’s why we build CoreValue to give them that information.

Noah Rosenfarb: Walk me through toward the origin of CoreValue, where were you in your life and your career that spawned this idea and the motivation to create this company?

Chuck Richards: A couple of things were going on all at the same time. One was that I had personally done well enough to be able to pursue that problem that I grew up with, you know, how can a town collapse? So I made it my mission to follow that thread. How could that happen?

At the same time, I was noticing as I talk to more and more business owners that those who build companies based on value, being the measure of success, continued to do well over the long term. And those who are narrowly focused on profit tended to get in trouble over the long term.

I could see there was a disconnect there. So what I did was I started a company to work with business owners to help them build valuable businesses. And really what I learned was really simple. It’s as simple as this, what happened to this little town I grew up in was that the owners of these core businesses in that town they were all the same age. So they all went through this transfer process or to sell process at the same time. The failure of the town wasn’t the fundamental failure of the businesses; it was the fundamental failure to be able to transfer those businesses to new owners.

As I looked at the problem, I begin to understand it was a transfer problem which really means is very simple; the businesses did not have enough enterprise value. It was a value problem that was going on.

Once I recognized that, I was doing two things at the same time. One was exploring how big is the problem? Because if it’s a small problem, then you know you can apply sort of simple smaller solutions. This problem is probably the largest economic problem this country faces.

If you think about private businesses with payrolls in this country, there’s 6.5 million in the US. That’s about half our job base. Seventy-five percent plus of those businesses are owned by baby boomers. So we’re talking about 4.5 plus million businesses. There’s an 80-90% failure rate to transfer businesses, to sell them, to move them from one owner to another private businesses. So all of a sudden you think about macro effects here, you’ve got about half our job base going to go through a transfer or sales event in the next 5-15 years where there’s an 80-90% failure rate. It’s a massive problem. That was one thing as I was looking at the size of the problem. So what we needed to figure out is how to help business owners make your businesses valuable in a way that made sense.

Increase your chances of selling your business at a higher price here.

At the same time as I was setting up, I was also the advisor, I was actually the chairman of 50 plus companies. I worked with thousands of owners. And we were, with our teams instilled processes and systems that enabled businesses to become valuable – help owners create options for their lives. And we were 95% successful. So we knew that we could build valuable businesses. The question became, how do you make that scalable so business owners could do that with their advisors? And that’s sort of the genesis of CoreValue.

Noah Rosenfarb: Have you since left advising owners or do you still have that other businesses as well where you’re the chairman and overseeing the implementation of creation of value?

Chuck Richards: Unfortunately, for me, I no longer do the advising work. I made a conscious call five years ago to get out of the advisory business and then build tools, basically software, for owners and advisors so that they could do the kind of work that I was doing with teams back then. It was a conscious effort to build something that was useful and scalable for these 4.5 plus million business owners that are going to go through these events in the coming years.

Noah Rosenfarb: How did you figure out that software to be the answer? Did you have it already from your experience as a consultant?

Chuck Richards: Exactly. It was a combination of being lucky enough to grow up in a world of process engineering at MIT where we measure everything, we follow systems and processes. So I was fortunate enough to be there. I was also fortunate enough to work with literally hundreds of companies and the owners kept sharing with me and working with me. As we build new processes, what we found is they were repeatable. And once you can find a repeatable process in a framework then you can begin to turn it into software that is very helpful and useful.

Back then, a classic kind of case we would be involved with using the CoreValue process would be a company that wanted to sell. There was trucking company and I was actually the chairman of another trucking company, the owner saw this opportunity to buy another trucking company. We went to meet with the folks and the numbers were spectacular, okay. It was a smaller company. They were asking $1.5 million for this business and $1.2 million in hard assets and had earnings of over $700,000. If you’ll look at the numbers, you say that’s an easy deal to do.

So we met with the owners and we couldn’t do the deal. Because we couldn’t understand how they made money. We didn’t understand what they did. It turned out that this husband and wife team who owns this company had been trying to sell the business for two years. They’ve been trying to sell it for two years because one of them was sick and they needed to move on with their lives. Now they have plenty of money, money was not the issue. But they didn’t want to do, because they had over 20 employees; they didn’t want to have the jobs go away. It was a small town. They believed in the company. They believed in the job. They believed in all that stuff.

We were the 33rd company to show up with a serious interest in buying them. They learned, basically, what I did as chairman and they call me a couple of weeks later and they said, “Listen, can you help us? Can you help us save the jobs? Can you help us move this company to a new owner for all the right reasons?” And we find owners almost universally care. Obviously, they want to be successful. Obviously, they care about their families and making sure they have a good life. But they also cared deeply about their businesses. They care deeply about their communities and their employees. And that’s what these people did.

So we had a discussion with them and went through the CoreValue process. Three months later, we had an all cash offer on the table for $2.1 million. Ultimately, they sold the company within the year for just under $3 million because they took terms. The ability to help business owners communicate to the outside world, the value of their business is the essence of what CoreValue does.

Noah Rosenfarb: Okay. So maybe walk me through a couple of other cases studies and that’s very powerful in going through it, an unsaleable business where there’s 20 employees and not only double the value that the owners had hope to receive but also make it saleable. I think that’s what a lot of our listeners are going to do for their clients; it’s one of the goals that I have in working with owners; and I think for the owners that listen to our show, they’re very interested in how to create more value in their company – how to create transferrable value. So tell me a few more stories.

Chuck Richards: Sure. This would be a manufacturing company. And, again, I was called in to help them because they had an offer on the table that they turned down. It was a small manufacturing company. The owner had something they wanted to do. A young guy, he was in his late 30’s and had been very successful. He was ready to move on to something else. So he put the company on the market, somebody came in, they made him an offer and the price was just fine.

Not a problem with the price. They went into do due diligence. And in due diligence, the person who made the offer came back and said, “Listen, no problem. We’re going to keep the price just as it is. There’s just one hook.” And as anyone who do deals know that there’s always at least one hook. The one hook was this that they would pay him but he had to stay for two years and run the business. And he goes, “No, wait a minute now. I don’t want to run the business. I’m selling it so I can move on to whatever I wanted to do.” So at that point, he turned down the offer and then he was brought to us.

We went in to look at the business. Nice business but, again, the inability to communicate to the outside world how the business ran because it totally relied on this owner. Okay, the owner was the octopus who had their hands on everything and a new buyer didn’t know how to be the same octopus. That’s why the deal had a hook in it.

So we went through the CoreValue process. Again about 3 months later, they got an offer for the business which was double the previous offer with no hooks. And that was great.

The funny part was, the owner said, “But geez, you know what? I really don’t want to sell my business now. I’m really having fun. I haven’t enjoyed my business this much in years.” And he said, “So I want to run my business for awhile more.” Because he was selling partially because he wanted to do something new and partially because the business wasn’t as much fun as it used to be and it was a problem in his life.

Well, he ran it for a year. At the end of that year, he decided that personally he was ready. He was going to sell it for the right reasons. He sold to the same group for double what he had originally been offered and he walked away to his new life.

That was pretty a standard story for business owners. Meaning most of them have something else they wanted to do in their life but they want the option to do it when they choose to do it.

Noah Rosenfarb: Yeah. We’ll that’s also a very powerful story and I think one of the things that I heard in that has been resonated by a lot of our guests, Matt DiGeronimo and Josh Patrick comes to mind, when we’re talking about the documentation of the owner’s role within the company. So can you describe how you see that manifesting in the case studies and the clients that you’re working with?

Chuck Richards: Yeah. I’m going to step back, again, just to go on a little bit deeper so people understand sort of how this can happen. Because when they hear stories, they go, “That’s great! But geez, can I do that? Could this really happen in my business?” And I want to assure people that it can. So just think about the business as an engine, the output of that engine is revenue and profit. And we measure that very effectively, thanks to GAAP, which is a set of standards and a set of financial statements that generate those two fundamental numbers.

The problem is those backward looking numbers. What we pioneered at CoreValue was the ability to measure how good is that engine? How strong is that engine? Because that’s what somebody’s buying, they’re buying the engine – the ability of that engine to generate future revenue and profit. So what CoreValue does is measure the strength of that engine. And the way we do it is really elegant.

Okay. So we took the same structure that you do on the financial side and move it to the operating side. Okay, we need a set of standards. We pioneered a set of Private Business Standards. Out of that came 18 drivers of value. And with those 18 drivers of value, we can measure how strong that engine is and we can generate a single number called the CoreValue rating from 0-100. If it’s a low number, it’s not a very reliable engine. It’s not very strong. And thus, it’s not very valuable. If it’s up towards 100, towards a higher end, that means it’s a very strong and reliable engine and people will pay for that engine.

The beauty of having a single number, not only did it tell you how valuable your engine is but because we’ve measured against 18 drivers, you can say “Well, which driver is broken? Which one do I fix?” So you can now prioritize. And so it becomes a framework for a business owner and then an advisor not only need to work together to make the engine stronger but also to communicate to the outside world. Now that could be that they want to go to a bank and get a loan. It may be they want to sell the company. It may be that they want to do an acquisition. It may be that they want to transfer it to their children.

Find out which of the 18 value drivers you need to fix in your business here.

At the end of the day, if you have a well-run engine and you can communicate that to the outside world then you have options. And that’s really what most business owners wants or the options to do whatever it is they choose with their lives. So that’s how CoreValue works. It’s elegantly simple.

Now, what I want people to say is that it’s simplistic which means below those 18 drivers, there are 2 more levels. There’s a level that you’re able to look at each driver down 3-7 pieces and underneath that there is a third level called due diligence. And we’re really on track if we’re going to do due diligence level. So it’s a very deep, rich, powerful system but you can start with it at a very easy level to understand your engine.

Noah Rosenfarb: So these diagnostics, you know, the software obviously which is a diagnostic tool, who are the users of that and then who’s implementing the advice that comes out?

Chuck Richards: What we’ve learned again over the years of being advisors that best outcomes happen when the business owners and CEO’s work with outside advisors. We know that to be true. What we’ve created is a tool that they can use together. It enables the business owner, it’s the business owner’s tool. I mean they have control of it. They control the whole thing. It enables them to work directly with an advisor to work on the business. But we measure it. Everything is based on an ROI. This goes back to my MIT roots is that with CoreValue, you’ll know what your business is worth today. You’re going to know what it could be worth if the engine was better run. So you’re going to come up with not only the enterprise value today but potential enterprise value in a gap between the two.

What’s really exciting to me, again we collect a lot of data, is the average business has 26% value gap. Think of it as the amount of money that you would leave on the table if you went to sell your company today or the amount that the new owner would be able to capture if they fix it. So it’s 26%. On our system we have over almost $3.5 billion of enterprise value. We have a lot of statistics to back this up. But 26% is the average number. The average business in the system has almost $3 million gap. So we get that.

Second thing that I find really exciting is that 44% of that gap can be captured by just fixing five things. If you fix the five weakest drivers, you’re going to on average capture 44% of that gap. Now, how you fix it is where a business owner and advisor work together. That’s the Josh Patrick’s of the world. You’re excellent at being able to do that kind of stuff and I’m sure that you are too. Now you can measure the ROI on the work.

There’s also a third piece of the puzzle that’s important. This is that we also track things called “Red Flags”. The red flags are things that can exist inside the business that can negate all the value. A classic red flag would be litigation. Certain kind of litigation means that your business has no value, so we track red flags – things that can negate all the value.

Seventy-three percent of the businesses on this system have red flags. I think that’s three quarters of businesses have red flags. And those ties back to some of the numbers that we see, we talked about earlier on, the failure to transfer business. Well 73% of the businesses have red flags, guess what, the chances of them transferring are at risk.

Because we identified them and because we actually know exactly what they are, so does the owner. The business owners go, “Oh, these are the red flags and I need to fix those.” And the number one red flag, as what I talked about earlier, is what we call the do-it-all business owner or the octopus which simply means that most of the business’ processes and systems reside in the owner’s head. The owner has to do everything, they touch everything. And so a business is fundamentally unsaleable if it resides in the owner.

Noah Rosenfarb: Well, what would you say are the other two most popular either red flags or drivers of the value gap?

Chuck Richards: Sort of the other one that we see, again, on the driver side, Sales and Marketing is one of the top weak places. When I talk about sales and marketing as a driver, I’m not talking about, you know, they’ve got good sales people or how much revenue they have and how fast they’re growing. I’m talking about systems and process. What we care about on a driver called sales and marketing is we care, not that they have hotshot sales people, but that they have systems and processes that can bring in new sales people. So that it isn’t a mystery how they sell. Okay?

It’s about processes and systems. That’s important. Because if you think about person who made value who might buy or who might lend money or provide capital to that business, they want to make sure that future revenue is assured in some way. And the only way you can assure future revenue is to have processes and systems in place that deliver it. So that’s an example of how we think.

Now, another classic red flag is Financial. Again same issues, it’s not about having good numbers, it’s about being able to deliver accurate information to outside sources and internally. So that’s a weak driver that we see.

The third one which is almost always there is called Barriers to Entry. Meaning, it’s wonderful to have a great business but if indeed someone can enter your market easily, quickly and cheaply; then, you don’t have a very protected business. And someone would really question why they should buy it because there’s no protection to that business.

Now, barriers to entry can be very simple things. For a retail store, it could be that they have the great location. A great location is a barrier to entry. If you’re a manufacturing company, it could be processes that are trade secrets. It could be a patent. So there are lots of ways of protecting businesses from outside competition. But in general, business owners don’t think about those things because they sort of that’s the world they live in. But they need to think about those things.

Noah Rosenfarb: The owners that I’m typically dealing with have companies worth $20-100 million in value and I found that the value gap for them is quite substantial. And then, obviously, when you multiply something like 20% by $20 million, they become really meaningful numbers and there’s some motivation. Have you found on your system that it doesn’t matter the size or scope of the business they’re still pretty consistent value gap?

Chuck Richards: Yeah, the percentage is very consistent. But you’re correct. The absolute number is significantly different. I mean a 26% value gap in a $50 million company is quite large, right? I mean you’re up to $13 million and if you’re dropping down but everything’s relative. What we find is that the value gap is an absolute motivator. But once a business owner and their teams can begin to quantify the gap, could begin to have a framework to look at operationally their business. It motivates them because now they can prioritize what to do first. We have yet to see an owner and a team not be able to generate huge returns on their investment using that framework. Literally, we haven’t seen any. The reason is not necessarily because of CoreValue; it’s because we find that owners and their teams of private businesses are goal-oriented. Once you help them understand that this is the goal and this is the objective, you know, 99.9% of the time they achieve it. In fact, they tend to overachieve on those goals.

So our job, I see from CoreValue, provides framework and quantify the numbers and help them sort of prioritize what to do next. We answer the “what” and the “why” questions for them. The “how they do it” is answered by the advisors, someone like yourself and others and say “Okay, here it is.” Let’s just say it’s a sales and marketing issue, we need to bring it a new process; a new system. We need to really start by documenting this thing. But how do we do that? And that’s where advisors come in. So what I do is I help document 10 systems or I know an expert who can help document systems and we can get that done very quickly. And here’s how we do it. So if you take all that sort of internal knowledge – desire, experience and expertise – and you link it with external – a trusted advisor – you get amazing result.

Want to increase the value of your business? Find out how here.

Noah Rosenfarb: To be able to distinguish between the results from different types of advisors that might use your software, you know, the accountants or the M&A guys versus the exit planners and the insurance people.

Chuck Richards: What we’re finding is interesting. A good general business advisor think of them as management consultant, some one who really care about the business, number one, who’s in their DNA they like to build things and in their DNA they like to work with other people. If that’s who they are, they do amazing things with CoreValue because they use the tool the way it should be used. Where they live, meaning where they work is almost independent. There are a lot of them in CPA firms. Some of them are exit planners. Some of them are insurance people. Some of them are bankers. They exist in almost all the professions. It’s really about what do they want to do; how did they see your world relative to the business community. That’s more important to success than it is exactly where they, sort of, hang their hat.

Noah Rosenfarb: So maybe you could, before we wrap up, tell us a couple of other stories of what does CoreValue identify in terms of the software side, what do the advisor do as a result and what was the benefit for the owner.

Chuck Richards: Sure. We had one of our advisors had a company that again had an offer and the offer was pulled back. So they used CoreValue with this business. Now, it would fall in your sweet spot about a $35 million business. So they ran CoreValue, the enterprise value number that Core Value gave the advisor or the owner was within a few hundred thousand dollars of the offer and we’re talking a $35 million offer which is great.

The thing that was more exciting and interesting to the owner was the fact that it highlighted 3 maybe 4 red flags and they were the exact reason that the offer was pulled. They looked at the red flags and they looked at why the offer was pulled. And so often they go, “Oh, now I get it.” And now, they knew what they needed to do to fix it.

Again, this is a young owner in his 30’s. He was selling it because he felt the business is out of control and that he didn’t have the tools to really take the business to next level. So this advisors said, “Listen, here are the things you need to take it to the next level.” So they no longer have decided to sell the business, they’re now building the business. And last I heard it was still growing at 20, 30, 40% a year and very profitable.

And again, it brought them the framework in which to do it. Now when they will sell, who knows? But as this owner has said to us, “We now have the option to sell if we choose. We don’t choose to right now. We choose to build the business.” And that’s the perfect outcome, I think, where people can work together.

Then we have another one which I find is interesting. And again, this is an advisory firm up in Canada and they have been using CoreValue for a fair number of years. And literally their very first client was an insurance company. The gentleman came in and said “I just want to run a better company. Can you help me build a better company? I don’t have any desire to sell it. I just want to understand what it takes to build a valuable business.” So they did. They used CoreValue as the starting point and they’ve been building successfully ever since.

This fall, about two months ago, they got an unexpected offer from somebody to buy the business. The offer came because they we’re doing a roll-up. And we all know what roll-ups are, that people come in they want to buy a whole bunch of companies within an industry. So a roll-up is a great place to sell into because they tend pay a little bit of a premium which is a strategic price for that business. They had a strategic offer for his business. And they actually paid him a lot more than they have expected because they wanted to use his business as the core of the roll-up. So he did the deal. He actually did the deal. He sold it. He kept a percentage of the business and he’s still working there. And now, it’s a significantly bigger business that he’s running and enjoying. But as he said to the advisor, he said, “I never would have had the opportunity if I hadn’t been ready.” He said, “The bus came by and I was ready. And I can’t thank you enough for making sure I was ready when the bus came by.”

Noah Rosenfarb: Right. I think that’s the message a lot of those time I share with owners to be ready. You got to be ready when they come by because if you miss it, who knows when the next stop is going to be…

Chuck Richards: But the other thing is, let’s go back to what you said in the beginning about a lot of business owners run their business in a Hip Pocket National Bank. Meaning, they live off the proceeds and live a good life and all those things and that’s good. I find two things; if you talk to business owners in general, yes, they’re living a good life but they’re always worried, right? They’re always a little concerned. They wake up at two in the morning. There’s just something fundamental that worries them. And fundamental worry is quite straight forward; they know that the business relies on them. They know it’s not a very reliable engine. And so they worry about that but they don’t know what to do.

But what we find pretty exciting is that if you run a business based on value; guess what, it will be bigger. So it’s going to grow faster. It’s going to generate more revenue. And by the way, it’s going to generate more profit because it’s just a better engine. It’s a better ran business. It’s more fun to run. It’s less demanding. It has more opportunities. So if you focus on value, you will get profitability and growing profitability and growing revenue because that’s the outcome of building a strong business.

If on the other hand you look at the rearview mirror and you just look at profit, the long term prognosis for that business is not very good. And that’s where the discomfort comes in and that’s why business owners in general are uncomfortable because they know something’s not quite right.

Noah Rosenfarb: So for people on the call that deal with the lower, you know, small family owned businesses, retail stores in their local town; they have $250,000 sales, $2 million revenue; is this helpful?

Chuck Richards: Yes. The one thing about CoreValue, it has given sort of our roots and expansures, is we have worked across all industries with the system and the product. In essence, files registers from about a $100 million down. Now, we’ve done some of them which are over $100 million in revenue but most business we’re working with $100 million revenue and down. We’ve got a lot of work with smaller businesses. And now as you said when we did just literally around the course, $250,000 half time employee retail business. They’ve found as much value in it as do the bigger companies because it gives them a better way to understand the operational side of the business and to run it and to prioritize what they do. And it works just as well for a small firm as it does for a big firm.

Noah Rosenfarb: So if there are advisors on the call that are interested in learning more or owners that are looking for someone that has access to this offer, what should they do? How would you like them to reach out?

Chuck Richards: Very simple thing, go to our website. It’s called There’s lots of information there. They can sign up for a free trial. They can go out and connect us there. They are welcome to our phone numbers right there. I would give it to you except I can’t remember it.

Noah Rosenfarb: It’s 800-640-1848.

Chuck Richards: There you go. And they’re welcome to email me, [email protected]. We’re working with lots of advisory firms from big to small. And we’re working on a lot of projects to deliver data back to owners and to advisors so that they can get smarter, quicker and better.

Noah Rosenfarb: That’s great. Well, I appreciate the work that you’re doing and the talent and dedication that I sure it’s taken that creates something that can help all of us in this industry. Help owners grow and succeed and achieve their goals. What else would you like to share with our listeners before we say goodbye, Chuck?

Chuck Richards: I think that the one thing I want to share is what I said earlier that creating valuable and building strong business is not a black art. It really isn’t. It’s about having a way of looking at the business, about having a framework, being able to measure things. And that to me is the most exciting part of this whole thing.

As I said in the beginning, this is a very big problem that 6.5 million businesses are going to go through this because of the private businesses – they are the engine of our economy. But by providing the owners and the CEO’s with a framework and a tool, we can begin to fix this problem. But it really is one company at a time. That’s why business owners say, “Geez, I’m interested.” And we have very elegantly simple ways for business owners to try this. They don’t have to jump in to the deep end; they can put their toe into the water by using Core Value gauge. It’s not going to cost them anything. Just try it. It’s the ability to provide the tools to people like yourself and other advisors and to business owners means I think we can solve this problem.

The critical thing that we’ve also learned is if you make companies valuable, they generate jobs. We don’t have enough data sets to give you the exact percentages but we know that when you transfer a business effectively and correctly from one owner to another. It can be from generation transfer from husband and a wife to their children. It can be to a new owner or to an ESOP or whatever. What we know is this, that in the transfer the company tends to throw down a little bit but then they take back up; that if you transfer companies well, you get job generation.

It’s because the new owners bring new experiences, new technologies, new ideas and new energy. And so you can re-energize a business in a changeover. And so if you think about what this country, in fact other countries are going through; Canada is going through the same thing; Europe is going through the same thing. In the transfer, this generational transfer, we can actually re-energize our economy. We can actually make things in this country better and the other countries better because we have new energy inside the private businesses that will generate jobs.

Noah Rosenfarb: Oh, that’s great stuff. I admire your vision and sharing as well. And I appreciate your taking the time to speak with our audience today. For those of you that can join with me and have someone in your office, in a client’s office, in a different town that might find value to this stuff that we talked about here at the exit strategy podcast; please be sure to share it with a friend. And we hope you’ll join us again soon.

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Written by Noah Rosenfarb

Noah Rosenfarb
Noah Rosenfarb, CPA/ABV/PFS has devoted his career to advising business owners on all things related to money. He is a Personal CFO and Holistic Wealth Coach at Freedom Business Advisors, which provides middle market business owners guidance on how to successfully transition out of the management and or ownership of their company. Mr. Rosenfarb is the author of EXIT: Healthy, Wealthy and Wise.

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