Podcast: Making Business Valuations Affordable, Accessible and Real-Time for the Middle Market

By Noah Rosenfarb
Published: July 16, 2015 | Last updated: March 21, 2024
Key Takeaways

In the past, knowing the real-time value of your private businesses was impossible. BizEquity is changing that by democratizing business valuation for the Small and Midsize Business marketplace.


In this podcast, Michael Carter, CEO and President of BizEquity, talks about:

  • The growth of the on-line business valuation market;
  • How BizEquity is "perfecting" business valuations with use of more data sources and real-time comparables;
  • Using valuation data from BizEquity as a prospecting tool for advisors; and
  • 78% of all business owners expected to fund 80-100% of their retirement through the sale of their business.

About the Guest

Michael Carter is the CEO and President of BizEquity, the first patented and leading online business valuation service. BizEquity was created to help democratize financial knowledge to the Small and Midsize Business marketplace.


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Read the Full Transcript Here:

Noah Rosenfarb: Hello everyone and welcome. It’s Noah Rosenfarb from Freedom Business Advisors here with my first time repeat guest, Mike Carter. Mike is the president and CEO of BizEquity. If you didn’t listen to the first podcast we had, certainly go back after this one and take a listen. The title is "Lessons Learned from Providing over 13 Million Business Valuations". Mike, I’m so glad to have you back. So now what’s the number? How many have you done in the last year?


Michael Carter: Thanks, Noah, a pleasure to be back. We’re up to 29.3 million.

Noah Rosenfarb: It’s unbelievable. It’s really, really wildly crazy, wildly successful. How are you doing it?

Michael Carter: Yes, so really opening new markets for one. Since we last spoke, which I guess was close to nine months, we moved up that number of valuations predominantly through expanding data relationships here in the United States and then also we entered new markets, which would be the United Kingdom with an office in London, and then also we entered the Singaporean market as our beachhead into Asia.

Noah Rosenfarb: That’s great. What do you attribute this fast adaption rate to? How come people are using the product so quickly?

Michael Carter: Yes, I think business valuation was something that was somewhat of a black art or something that somebody could come in and go through your tax returns, you wait for 4-6 weeks and if you’re willing to take that pain and suffering, and pay $5,000-$10,000, you could get a valuation report back. What we saw as we talked about I think in the last one which was terrific was the fact that despite all that, that it costs close to $10,000, it takes 4-6 weeks, and less than 2% of all businesses actually do one annually, it was $7.4 billion market just in the US. What we did was really democratize it, put it online, make it better, faster, cheaper, and really enable every business through their advisors or financial institutions or directly to understand their value now for pennies on the dollar comparatively. I think that really helped speed the adoption, and then also using big data. So the 29.3 million valuations that we’ve been able to utilize really is a credit also to our engineering and data team, the ability to do that. Much like if you think about what Zillow did in the early 2000s with home values. We kind of do that to kind of see the market to get usage on the actual business valuation itself.

Noah Rosenfarb: I want to talk about that but before we get there, on these valuations, do you have a sense and then probably it’s just anecdotal of the 2% of businesses that had valuations done before, how many of them are using BizEquity and how many of these are companies that had never done a valuation? Are you tapping into the 98? Are you getting into the 2%?

Michael Carter: It’s a great question. Right now, the early evidence is in. It’s kind of a mix. If you asked me early on, I would have thought it would be all new users, meaning we’re democratizing it. We’re making it available to people that couldn’t afford to do it or didn’t have the time to do it.I think that represents 6/10 of the pie for us but the other 40% are really people who are really, “Wait a minute, your report was as good, if not better, than what I paid thousands of dollars for. I’m just going to use your service.” So that tends to be the breakdown thus far.

Noah Rosenfarb: Yes, what’s interesting, as the listeners probably remember, we started using BizEquity in our practice kind of right out of the gate, I think. Mike, you and I met pretty early on through my partner, Scott Yoder, and we just love what you were doing. We’ve done probably close to 40 valuations in the last 12 months and I think only two of the clients had actual reports. So our statistics were probably more skewed to what you would have thought and of the two that had the valuations done, our numbers were pretty close. They were very impressed and then with the, let’s just 38 that never had evaluation done, we always like to ask them before we show them the number, “What do you think the business is worth?” Some were surprised at how much higher it was, some were surprised how much lower but really no one was disappointed. Everybody felt like the data was there, the numbers were there to support the valuation. What’s the feedback that you’re getting? How do you get it so close without that personal interaction that most of the valuation and appraiser experts are doing with the client?

Michael Carter: Yes, so one of the things, you know, we’re still a fan of the traditions method, meaning we think that they serve a purpose, the offline provider, so on and so forth, so I don’t want this to be a session on me saying anything negative towards them, but I’m just going to state some of the facts. So we talked about the cost, we talked about the time it takes to do valuation. The other reason I think why we’re getting so close, if not closer, I would say to perfection in terms of the business valuation, is the fact that we just use more data sources – meaning it’s our model as we talked about in the last call that we think this hybrid model that can really help value tax efficient, privately run businesses not just growth companies. So we handle both of those.

The other thing is we’re pulling from as close to actual real time comparables as possible. If you think about, for a lot of your listeners, the public markets. Edison created the stock ticker 117 years ago. So the biggest companies around the world were able to know what they were worth in that point, weekly and then daily, and then now of course it’s real time, but for the 99.999% of companies that aren’t public that haven’t been afforded the availability to do that. It wasn’t just for us to kind of create a better, faster, cheaper way to value business and put it online in the cloud, but it was also how can we get as close to real time value, actual real time value despite the fact that the company is private. So we just pull from so many different data sources. To quote the IBISWorld article on business valuation, I believe they stated that the average valuation professional that did this offline valuations was 2.2 people, the average size of the firm, and that they pulled from 1.6 databases. So if you think about it, no matter how good they are, they are just not going get close to perfection if you’re only using 1.6 databases. Our goal and mission is to have more data on more businesses than anybody in the world and thus to provide perfection in terms of valuation but then also dig into the performance of how the company compares to their peer group and do it better than anybody in the world.

Noah Rosenfarb: So going back to the Advisor Office, we started using your Advisor Office product right when you launched it and while we’re still getting used to it, we see this tremendous opportunity for us to market to businesses that we didn’t existed but we can find them through your software and get a sense of what they might be worth. How did you come up with the idea and explain to our audience how Advisor Office works?

Michael Carter: Yeah, the thing that gets me always so happy to talk to yourself or your partners is the fact that you guys are paid members of the service and you’re excited about it just because of your success. You’re an expert of the industry and a student of the industry at the same time. I think this show is terrific for all the advisers out there.I just want to say thanks for that. This is a fun relationship because we’re excited because you’re a client and you see the proof in what we’re doing.

Before I answer your question, I would just say what I love so much about what we’re doing and the product that we’ve developed here with Advisor Office, which I’ll talk about in a minute is that we’re helping the business owner through advisers, so everyone’s winning. A lot of times in any transaction from a business perspective, there’s a side that always feels that maybe they weren’t treated as fairly as the other, one wins and the other one loses, or one kind of loses and one kind of wins.The thing that I love about this is this is truly a win-win because you’re giving business owners, which are your best clients a lot of times, something they were never able to really get and you’re exposing them to that.

What we’ve really done with Advisor Office with that in mind is to say, we want to double down on the channel of advisors – be it registered investment advisors, estate planners, CFPs, and even insurance agents because we see everything kind of leading in and blending into one in a sense. We want to show our commitment to the channel and do it with a product that only advisors and Advisor Office clients would have. With that said, what we did, Noah, as you said, was we codified our product around a day in the life of an advisor. That is about two things – taking care of existing clients better and finding more of the clients that you actually want that are your best clients. What we’ve figured was there were a few common denominators there. A lot of times what we’ve found was the fact that the best client and the ones you want to attract more of had something in common, they were business owners or CEOs of privately held companies that had real equity in them or they were entrepreneurs.

With that in mind, we turned the whole idea and notion of business valuation upside down – meaning business valuation shouldn’t just be something that is used after the deal is won. It should be something that you use as a way to show your constant value. Why clients should pay you your annual fee because it’s something again, you’re going beyond and giving them more and more value add. You’re giving them a picture, a snapshot of their biggest asset sometimes, their business, and their business is worse than 29-page report, that’s one bit, but with Advisor Office, what we also focus on is that second scenario which is how do you find more of the clients you want and I would think about it this way, that nine months ago, it was really focused around more customer care and estate planning and how can you do proper estate planning if you can’t value your client’s biggest asset, which is their business. Advisor Office is like saying, “Well, how do you find more of your best clients?”

What we did was we added a silo-like feature as Noah said where now any adviser that’s an Adviser Office client can privately pull the service from BizEquity, have their own brand on it, and in less than 10 minutes get up and going, have your own sub domain, so Advisor.’ll have your own branding on what’s your business worth, you’ll have your own link to send to clients and prospects, and then you could do something really cool, which we call the prevalue search feature for a business estimate, BizEquity estimate. So as Noah has seen, for instance, he can say, “Show me every business valued $5-25 million in these particular industries. You can specify an industry or not. Then using a propriety scoring methodology, a whole bunch of businesses appear and their representative value. What Noah and his partners have really cracked the code on is it’s a much better way to secure a meeting with a high value prospect by giving them something of value going into that meeting.

You could call that business owner and say, “We have this new tool at XYZ Adviser.Our tool tells us what your business is worth and we’ve estimated that your business is worth more than, let’s say, $18 million. Do you have time? Can we come by and show you the products and services and have a conversation?” All of a sudden, it opens doors and that’s what’s exciting for us, getting back to the win-win, is the advisers that have this product, so far 100% of them are really excited and satisfied thus far with the product because it’s enabling new conversations to occur.

Noah Rosenfarb: I just want to add to that, Michael, one of the things that it did for us, we’ve been guessing based on a data that we had access to how many potential clients are in our market. Our marketer, it’s essentially companies worth $5-100 million from Palm Beach to North Miami. We have estimated there might be 2,000 potential clients but once we were combing through the data that you have compiled, we were like, there are significantly more which means there is significantly more opportunity for us than we originally thought. We started going niche by niche because we have a niche for car dealerships. We’ve done a lot of work with car dealerships and we just told the list, I think there were like 120 car dealerships in our local Fort Lauderdale market that fit our criteria that we’re going to start a direct mail campaign to. It’s pretty exciting.

Michael Carter: Thank you.

Noah Rosenfarb: So where are the Adviser Office clients coming from and what are they looking for out of the product? As I mentioned, we’re in the business of helping owners with tax estate and financial planning so whether they are thinking of selling their company or they either update buy-sell agreement or they want to create a golden handcuff plan for their employees. We have a suite of services that we can provide to them. At the backend we’re earning commissions from life insurance or business transaction fees or investment management fees. We have kind of a fairly broad model of how we can monetize a relationship with a client. What do you see, what are the other advisers doing? Are they all in a particular niche?

Michael Carter: Yes.I think there’s one common denominator from all the advisors that we’re seeing is that they know that small business or privately run businesses are the key to their success in getting to their owners or getting to their executives because they are big insurance opportunities because most of the times, these folks are under insured. It’s also big estate planning opportunities because you can show value and help them as they plan their estate. So that’s a common denominator. And how we’re finding them or them finding us, we just launched Advisor Office, I guess it has been five weeks now, and what we’ve been able to do is have close to 15 advisory firms already signed up representing close to a little over 100 individual advisors or agents just in 4-4.5 weeks since a lot of these folks have signed up. So five weeks we announced it, the last 4-4.5 weeks, we’ve been in the process of signing people up. We have over 15 firms right now and we’re talking to some of the biggest carriers in the world, which we’re excited about because we just think this is the way that business is going to be done in the future.

There’s a great stat that the CEO pipeline company that we respect a lot at one of their user group conferences had which was eight out of 10 advisors leave the profession in the first 10 years due to poor prospecting. Your scenario in South Florida and Palm Beach for instance I think highlights how this product with this little feature that we call prevalue search which is our Zillow-esque type of feature really changes that. It mainstreams this whole notion which was this black art of business valuation and puts it in the mainstream. If you think about it as we spoke about it in the last call, for hundreds of years, people have been running up their business paying money for software really the last 20 or 30 years to make them more efficient but they still answer the most important question for why they are running their business, which is what’s their business worth and how can it be worth more. Now we’re putting that in the hands of advisers and giving them the ability to search for businesses and what their value is.If you think about everybody that has a CRM tool or solution, which are terrific products. We use here. So we’re a fan but CRM is only good if you actually have a prospect to put in the database. Who really cares if the database is in the cloud if you’re just inputting a contact? What we think is all the magic happens upfront is how do find new prospects to put in to your CRM solution. We think that’s what we’ve kind of cracked the code on.

Noah Rosenfarb: One of the challenges we’ve always had in trying to prospect is first, unearthing people but then qualifying them and the tool used like a really easy way for us to find names of people we might want to meet with, companies that we might not have known about that are right in our sweet spot geographically and potentially valuation wise. We’re loving it. We’re excited. I think what you’re doing is really, it’s an amazing application for democratizing valuation and I’m excited about what it means for the business owners because my whole professional experience as I mentioned in the previous episode, I used to testify in court about how much businesses are worth and sometimes I’d be charging $30,000, $50,000, $75,000 to a client. We hone in on those numbers and here we have this way for me to go out and meet with an owner, and within an hour or two, I’m able to produce a report that really provides significant value to them. For me, my preface is always I think this either supports the owner’s estimate of value or it doesn’t. If it doesn’t, let’s find the reason. Probably nine times out of 10 the value ranges within the owner’s estimate and therefore we’re confirming what they thought they already knew. That provides some peace of mind to them that they were right.In the instances where they are not right, we could dig in to figure out what’s missing and I just think it’s wonderful.

Michael Carter: Thank you.

Noah Rosenfarb: I’d want to congratulate you again. Where do you see things going? How do you see accountants responding to this, the people like me that are accredited in business valuation, testifying expert? Do you think the IRS is going to accept these reports for family limited partnerships or business interests that are used as gifts?

Michael Carter: Yeah, so I’ll start backwards.I refuse to comment on what the IRS will or won’t use but what I would say is where we see this going. We want to be the standard in the space and we think that the global opportunity and we think the timing now is better than ever with the hybrid advisers now that exist between insurance and financial advice coming together, and the big thing around succession planning. There’s a great article by CNBC and news item maybe about three weeks ago where they did an article profiling small business transitions or successions in the next 10 years. I believe their stats were 78% of all business owners in the poll by the FPA said that they expected to fund their retirement 80-100%, literally, these were the numbers, through the sale of their business yet less than 20% have planned to sell their business or have any idea what the business is worth.

Noah Rosenfarb: Unbelievable.

Michael Carter: Yeah unbelievable but it’s a massive opportunity for this industry – meaning your industry – to help because it’s great, right, if you can make money while helping because then you can justify what you’ve made and this is a clear area where you can help. We really view it as wealth advisers, financial advisers, insurance agents are kind of the two of our major channels as well as banks, so the traditional lending and banking environment around commercial loans, but if you think about a bank, their biggest asset literally is their branch infrastructure and the real estate they own, yet they have nothing that really drives in-store engagement or in-branch engagement. We think this is a product that could drive in-branch engagement if it’s online if they would pick it up at the branch. We have some great case studies or success studies and stories around that with Metrobank in Harrisburg and Fox Chase Bank in Pennsylvania, two terrific banks that are publicly traded. As well as the close to 7,000 community banks that exist out there that we think that there’s a great opportunity with, but your point about accountants and certified valuation experts, we really view that as that’s going to come and I would kind of classify that as probably 2016-2017 initiative in terms of having proper market share in these categories. We kind of view it as a herd mentality that the innovators and the first movers are people that are constantly looking to strive for taking care of their clients better, which would be the IRAs and the financial planners, even insurance agents and bankers. They are kind of our leads in but we do see more and more attraction from the accounting profession to our product as well.

Noah Rosenfarb: Well, that makes sense. I guess I never thought of it as, you know, in our markets, we’re always looking for ways to differentiate. The accountant has a different type of relationship with the client than the financial adviser does and we were reading all these articles about robo-advisors and how our business is going to get commoditized because all we’re selling is money management, and I think if that’s the case, then they are right but we’re always looking for ways to different and add value to client relationships.Is that kind of where this is emanating from, from those financial advisers that are looking for differentiation?

Michael Carter: Yeah, totally. We were at the investment conference as well as a campaign that we respect a lot called eMoney and we were at their conferences.There’s real buzz around robo-advisors and I think if you think about ourselves, you think about investment, you think about eMoney, we’re all in the market to help the hundreds of thousands of financial advisers that are out there truly differentiate and show the value of what they provide and why it’s important to have somebody and to have a firm that’s close by and to have the offline relationship using online big data cloud based products like ours. We think we’re in another arrow in the quiver to show that differentiation, but to your point, there’s so much noise around robo-advisors so anything that I think traditional advisors can do to show that value is really important, but I always think it’s interesting because there’s a company located not so far down the road from our headquarters with an amazing founder by the name of Jack Bogle called Vanguard. If you think about what Vanguard has done from the beginning and really since the dawn of the internet, they had really transformative CIO in the 90s, I think subsequently has passed away but was an incredible guy. They kind of created, if you think about it, the first robo-advisor where they are online. You can have your money managed but they were smart. They still traditionally use financial advisers and you guys, for instance, can offer Vanguard types of funds. I always kind of smile to myself with this robo-advisor movement where there’s essentially home pages that then lead to Schwab or Vanguard anyhow but I do think that our product really helps the traditional advisers differentiate.

Noah Rosenfarb: Well it’s great.I’m really excited. I’m glad to have you back on the show and share with our audience what you’ve been up to. If you haven’t checked out BizEquity, make sure to visit their website. You want the Advisor Office product if you’re looking for new clients where ways to better serve your client base. Michael, what else do you want to share?

Michael Carter: Again, I think your service here and what you do is tremendous to the industry and I really appreciate how unselfish this is because you’re having us on, which is a product that clearly you’ve used for your own competitive advantage in your own market and you’re willing to share it with your peers. I really appreciate that and I’m sure your audience does as well.

Noah Rosenfarb: Well, it’s my pleasure. To those of you listening, be sure to rate us on iTunes. Send us information for any guest that you’d like us to have on. We appreciate you, our continued listeners. We hope to have you again on another podcast. Thanks, everyone.

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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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