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How to Increase the Value of Your Business

How to Increase the Value of Your Business


I’m going to talk to you about 10 things you
can do to increase the value of your business. But before I do that, let me kind of put things
in perspective so you kind of have an idea why this mindset of value, profit, conversations
you always hear about. So many people run a business and by the time
the year end comes with taxes, any profit that the company makes, they like to take
it out, pay taxes on it, and put it in their own checking account, right? Because it’s my profit, it’s my business,
it’s my this, it’s my that. And then there are those that say, man, this
is what I need to live off of, but let’s let it ride. Let it ride. Let’s grow it. Let’s let it ride. Let’s invest. Let’s let it ride. What is the difference between the two and
why does some do one over the other? Here’s the difference. Profit, value. Short term, long term. Working in the business to make money now,
working on the business to increase value later. Now, later. Instant gratification, delayed gratification. More like a sales mentality [profit], more
like a CEO mentality [value]. Independent contractor mentality [profit],
business owner mentality [value]. So this is something you see a lot in business. So you may be wondering yourself and say,
“Pat, I get it, but I want to increase the value of my business. What should I do to increase the value of
my business?” I got ten keys for you. #1, if the business is based on a technology
that you own that a person, a company may have interest in wanting to buy your company,
that that technology can be used in their entire spectrum of business that they’re doing,
that increases the value of the business, especially if you own the technology. If your business is ran on technology and
systems and CRMs and back office, all these things that make things go faster, where,
you know, you’ll typically need 200 employees to do this, but because you have the technology
you only need 45 employees to do this, people who want to buy a company like that and that
increases the value of the company. #2, focus. Your focus into what you’re doing, there was
once a book written I read I think it’s called Built to Sell, Built to Sell is a book, a
phenomenal book, I think every entrepreneur running a business ought to read the book
Built to Sell because what the book tells you is not to focus on selling your business. Focus on getting focused with your business. So what is the product? What do you do? Hey, I’m trying to do this. I’m trying to do this. We do this, we do this. So many different things that you do where
to increase the value of your business, why don’t you focus on one, two or three things
that you do, but increase your attention on those things. It increases the value of your business. I understand how sometimes it can be tempting
to say, but Pat, if we do more, the value goes higher. It does not. The more focused you are, the more you increase
the value of your business. #3, a business that’s ran on systems, not
just you, increases value. If I can come into your company and I walk
through, and I say, What did she just say on the phone call right now? Oh, she said this, this, this, this. Do you have it on a sheet of paper? Uh, no, we just taught her. What if a new person comes in. How do they learn? Oh, they just sit right next to her. Is that typed out? No. That’s systems. You don’t have it. You need to. . . okay, we’ll type it out. If I come in and you have a new employee,
what are the steps when a new employee comes in? Step number one, two, three, four, five, six. You don’t have that? You need that. It the person buys this product, what’s their
next step? What do you do next? What do you do follow up? We don’t have that. We don’t have that written out. These are systems and procedures. Businesses are built on systems. Grow more value because it’s got a life of
its own without the human being. Now obviously, you need a driver, but the
system takes your business value to a whole different level. #4, Strategic partners. What are we talking about with strategic partners? Look, strategic partners not only validate
the business, they increase the value of the business. They have good things to say about you, and
when it comes down to it, they can bring complete different aspects to your business that you
may not have yourself. So I think strategic partners play a very
big role in increasing the value of your business. #5 is recurring revenue. Ask yourself with the business you have right
now, what part of it recurring? What do you make every single month in your
business whether you make a single sale or not? Recurring revenue produces the highest multiples
that if somebody buys this book it’s got the highest multiples. Next, is supporting cast. Operations and supporting cast. Who is around you? Who’s running the company? This is the part where somebody who’s driven
on profits, they don’t invest in the people. So the value doesn’t increase. I remember many years ago I was running a
sales office, and there were these two guys who were my competitors. And I’ll never forget a call I had. It was within a week apart with each one of
them. And we were doing a cruise contest, something
like that I was running for a sales contest. And they both had bigger distribution lists
than I did. I had a smaller one. But by the time it was done, they only had
six people or four people they wanted to pay to go to cruise because it was going to cost
them $600 or $800 and they said, no, I’m not going to pay for them because of . . . I said, man, you’ve got to invest into your
people. So what I did is I went and paid into it for
43 people, them and their spouse. And we went on the cruise. Those guys had two. This guy had three. We had 43 people there. Okay, investing into the people. The level of loyalty we got from them who
were willing to come back and wanted to learn more, improve more, better the company more,
was a lot higher. That’s investing into a supporting cast that
wants to be in the company. So the more you invest into your supporting
cast to help them get better, they’re more indebted to you, they’re more loyal to you,
they’ll stay with you longer, and the value of the company goes higher the better supporting
cast you have. By the way, this also goes with your executive
team, who you bring onboard as an executive team, your sales force, every single thing
that is part of the supporting cast to growing the business. #7, data. Sometimes you see companies that buy another
company and they cut a big billion dollar check and you say, that company’s revenue
was only $50 million a year. Why did they cut a check like that? Because they have access to a lot of data
that they need. So if you have data, data increases value
of a business. What type of data are you gathering yourself
and how big is it, how wide is it, how deep is it that another person, another company
can say, this is valuable and it increases the value of your business. #8, EBITDA vs. need. Let me explain what EBITDA vs. need is. EBITDA stands for Earnings Before Income,
Taxation, Depreciation, and Amortization. That’s what EBITDA stands for, right? So a lot of times you’ll hear a company say,
well, why would we buy your company because your EBITDA is so low and you know, if we
do the multiples based on your EBITDA, yes, your top-line revenue was XYZ, but your EBITDA
is so small, you know, why would we do that? Because you’re solving for EBITDA. I’m not solving for EBITDA, I’m solving for
value. You’re solving for profit. If I solve for profit, I stay flat. Because I solve for value, I’ve grown quarter
after quarter after quarter after quarter as a business because I’m solving for value. So, the more you focus on a need, meaning,
going to your industry, whatever business you’re in, and find a need that exists that
no one’s focused on. For us, there’s a need that we have. Increase the need, where if somebody has an
interest in your business one day, it won’t be based on the EBITDA. It will be because this need will fill another
void that they have that the profits here will go up to the roof because they locked
in a need here. Two businesses, this one [need] increases
a side that’s about distribution this side increases the profits. This profit that they make here is well worth
them paying for the company, the value of the company because you’re solving for a need,
not just for EBITDA, although you still need to have profits, no company that goes out
of business, your company’s worth nothing. You do need to have a focus here [EBITDA],
but not to the point where it’s only short-term instead of long-term. Next, subscribership and distribution. What is that? That’s an audience, you know, when you see
a company like Instagram being bought, but they don’t know how to make money, why are
they buying them? It’s because they have an audience. There’s a distribution. So always focus on what you can do to increase
the distribution of your business, your company, the eyeballs. The amount of people that are seeing it. The subscribership, the customer base. It has something to do with recurring revenue,
but it doesn’t. There’s somebody that’s constantly coming
to you that’s logging on to your website. Like, you know, a Huffington Post has subscribership
that people are coming to it and email subscribership, anything that’s listening to something that
you’re offering that increases the value. And last but not least, stay hands on to increase
the value of your business. I think a lot of times people take their hands
off the business too early and they become CEOs too early instead of becoming you know,
somebody that’s a businessman that at the end of the day your job is to increase the
value of the company and if you do a good job increasing the value of the company, you’re
a CEO. You’re a great CEO. But don’t take your hands off too early. A stay hands on CEO or executive or entrepreneur
knows about what’s going on with technology. Knows about how focused the product is and
if we’re getting distracted. Knows about the system, is hands on with the
strategic partners because he makes the calls. Is hands on with the recurring revenue. Is hands on supporting cast, is hands on with
the data that’s being gathered, is hands on with the need and the EBITDA and is paying
attention. Is hands on in increasing distribution and
subscribership. Always stay hands on to increase the value
of your business. With that being said, Luis, throw me a pillow
right there because your buddies are not here today. Because we got a flight. I’ve got to get on a flight to New York and
Madrid here and I got a few meetings in New York before going to Madrid. Anyways, so, this is a topic that I went in
and tried to do in a few minutes because I have a conference call here myself to do. But if you’ve got questions about it, comment
on the bottom about how to increase your value of your business. This is a topic that is extremely important
for you to pay attention to. If you watched it once, watch it again, take
notes, print out what we have, re-read it, and find ways on what you’re doing yourself
for your business to increase the value of your business. And if you have not subscribed to our channel
yet, if you haven’t subscribed to Valuetainment yet, please do so. Click right here to subscribe. [breaking glass sound] You completely missed
it, Luis. Click right next to it to be part of the notification
squad, the alert, click on that as well. And with that being said, have a good one
everybody. Take care.

Comments (100)

  1. For detailed notes and links to resources mentioned in this video, visit http://patrickbetdavid.com/increase-the-value-of-your-business

  2. Notification Squad

  3. WAY #1: WATCH PATRICK BET-DAVID daily!!!

  4. the patrickbetdavid website looks awesome

  5. how or who to promote in t he company please make a video on it

  6. 👍👍👍🖒🖒🖒

  7. try my best to be the first … never works out

  8. So it's a matter of adding assets and its value?
    Hmm interesting

  9. thanks pat Have a great flight

  10. That lion grunt at the beginning makes me hungry. 😂😂

  11. This channel would be better if you put subtitles in English, subtitles from YouTube are not good.

  12. thank you so much for inspiring me and my family . Jose&Ashley Newbritain,CT

  13. Hi Patrick, can you explain more about strategic partners? Who are strategic partners and how to get strategic partners? Thanks!

  14. I mostly agree with you and I would also add one important point:
    Minimize human labor as much as possible and replace it with systems, machines and processes.

    For instance, instead of a secretary I use an information system and through automatization I need one less person.

  15. hey pat can you make a video about stocks market like stocks 101 for entrepreneurs?? i want to know your vision and what do do in the stock market if you have 20 years again

  16. Nice! Pat make some vídeos about pitch to investors, and business models! 🙂

  17. You deff changed your barber. Go back to the last one 😂

  18. Love the videos tho ! Subscribed.

  19. Hey guys! Why don't you collab with Gary Vaynerchuk? I think it would be a great collab and lot of things to learn!

  20. Currently starting up my own business and came up on Valuetainment while doing research for tips and stuff I know I would never think about. Replaced all of my no brain Netflix shows for educational video's like this since they are of way more value than all of the school courses I've ever had. Well they did teach me some stuff I'm sure, but education based on experience from entrepreneurs who know what they are doing is in my opinion, the way to become a successful business owner.

    Thank you & keep it up. I'm sure you will inspire and help a lot of other people who haven't yet came upon this channel.
    Robin

  21. how do I increase my value if I'm going in real estate?

  22. notification squad

  23. Hey Patrick, again a great video! Just as a constructive correction: EBITDA stands for Earning Before Interest, Taxes, Depreciation and Amortization. What you mentioned was slightly different. But as I said, this is again a great video for which I took notes and can apply to my business.

  24. Great video! So helpful and on point!

  25. profit is short time u earn money fast,instant (sales man mentality)

    value is long time,delayed gratification (ceo mentality)

    to increase value

    1technology (makes things more efficent)
    2focus(focus on selling business increase intention on things that matter)
    3systems(makes life easier everything is the same for each customer)like steps 1 2 3 4 5
    4strategic partners( good partners can bring a new part of business u couldnt bring in)
    5 recurring revenue(produces highest multiples so keep the stuff that sales and makes most)
    6supporting cast(invest in peoe that care about value of busines such as give them cruise tickets)supports loyalty
    7data(increases value of business ex contact info.
    8EBITDA(Earning Before Income Taxation Depreciation Amorization)basically operation performance of company vs NEED (need is better than ebitda because if u have a need u wil earn more and then have a better system than a company just focusing on systems)
    9 subscribership and distrubution
    (use customers to make more sales)
    10 stay hands on(dont let go of business) and(know youre business to increase value)

    ■the more you focus on money youre FLAT■

    ■the more u focus on value it GROWS EXPONENTIALLY■

    great vid

  26. One of my favorite videos. Needed this right at this time! Thanks PBD.

  27. Anyone in music production business and would like to talk and share experience?

  28. 1mil subs is totally real for this channel , thought it's a long shot from the beginning but the way it grows and with more people becoming interested it is totally possible. Good work guys keep it up.

  29. Thanks Patrick, This video is spot on. I appreciate the enlightenment.

  30. I always like your videos before I start watching it. because I already know it will be good!!

  31. Patrick, you lost me on the EBITDA vs. need, and the detailed notes said go to the video. can you please explain this?

  32. Good vid, but so everyone knows, the "I" in "EBITDA" is "Interest" not "Income" 😉

  33. I hope everyone has a great day!
    From a small YouTuber with almost 1K! 🙂

  34. If you like Pat and this channel, check out Alex Becker here https://wn.nr/hSZAq8 a lot of value.

  35. Valuetainment/PBD: May you do a video on 15 ways to increase your individual & personal value ? … Thanks !

  36. Just when I think I can't be more in awe at Pat's knowledge he impresses me once again.

  37. Systems was a really good point. Very good advice that will def help

  38. Hey Pat. I've been watching your videos for some months now and have absolutely been blown away by your mind set. I love the way you think and you have encouraged me to set out on a new journey and start my own business. I started some months ago but recently I've been experiencing some difficulties. If you ever read this, please see my story and help spread the word. I hope I can one day speak to you in person. https://www.gofundme.com/Help-Revolutionize

  39. glad I took a sick day from school to work on my business #notificationsquad

  40. fantastic episode pat. shared

  41. very valuable !! thanks Pat

  42. Hey! Pat! What is the video editing software you use??

  43. hey pat! , I am Gabriel and I am 19 now. i have a great vision for my self. you are the best entrepreneur that I have ever known and i wish to be a kingmaker like you one day (more like soon ) ..i watched almost all your videos and I gain a hell lot of knowledge for my self by writing down all what you teach. So pat, can u recommend one or a few books for me written by you or others that u think can benefit a person like me . i just need two books
    -how entrepreneur like you think
    -how not to have the same mentality as most business owner

    thanks pat i sincerely appreciate your recommendations 🌷💪🔥

  44. Loved the video Patrick, really good information!

  45. Jesus christ I love this channel so damn much!!!! Literally, best YouTube channel for entrepreneurs! Hands down! No competition. It's funny how far ahead this channel is! LOVE IT!! Keep this up, it's so damn appreciated!!

  46. Forget all the hogwash about finding your passion. You want riches? No problem, allow me to shove you in the waters of wisdom and the money will seek you. come check out my channel

  47. Thanks Pat you're the best👏 keep them coming

  48. What happened to the Biz Doc????!!!

  49. I look forward every Friday to hearing from him!

  50. I cant think of a name for my business, every name i do research on is taken….ugh help

  51. pat can you more about the points that come under the heading of system !

  52. Sharp haircut Pat!

  53. My profits are low, but value is rising constantly. I hope profits will follow very soon but I'm afraid I'm doing something wrong on some steps.

  54. I always get best best business school in this channel despite being tooo far from you brother..I'm from Tanzania. Thank you so much!

  55. Value personified. This content is priceless. Thank you Mr PBD

  56. Pat your info is so powerful. I just started my company 2 years ago. Im growing slowly but Im still trying to do almost everything by myself. THERES NO SYSTEM. I guess im still in the research and development stage. Thanks for the tips.

  57. If you are an entrepreneur or aspire to become a future entrepreneur, subscribe here for great business advice: https://wn.nr/634Bhv

  58. I see many people take money out of business, I decided not to take money out for 1 year to grow my business.

  59. #1 sneaky secret I have used to grow the business that I mange, but don't own. I was sent to a conference by my business, and one of the seminars was by a consultant. I listened to what they had to say, then looked up the examples they provided and copied what was applicable to our business. No lie, our profits went up 398% in the year. The seminar was only named "Raise your profits 30-57% in one year" so they did pretty good.

  60. Focus on getting focused with your business.

  61. Thanks Pat for the great values you are always sharing. For this video, as a small startup, the 2 big points we were missing are the focus (we'll go through the book "built to sell" to learn more about it ) and putting in place systems in all areas of of our business. Thank you again.

  62. PBD, you are the man. Have a safe trip and thanks for your amazing videos !

  63. Patrick , you look like a Gangsta Rapper , like the cousin of Drake

  64. Great content ! Thank You Pat ! 😉

  65. Still going- great video Pat.

  66. So good pat. … another book in the making. Very rich content . The art is 'when' let go. And rather than becoming the CEO , when other begin to call you that , it's definitely a sign . Keep em coming A+ valuetainment

  67. I hope you were a Barcelona supporter.

  68. May God bless you Patrick. You have changed my life. bizness, fitness. and marriage. Blessings from Nigeria, Africa

  69. music in the extro please ?

  70. Could you do a follow up video going more into depth on topics like focus, systems, and strategic partners so you can create a better template for entrepreneurs? With the business I am going to start, strategic partners, focus, and systems are biggest hurdles.

  71. Pat, your content is becaming more superficial. Only 10 min to explain Value of business? You should make the 30min content, with a lot of details and examples. This is the true VALUEtainment.

  72. hey patrick i had a question mainly for my brother. My brother is the best sales person i have ever met in my life, he's 30 years old and working at frys in alpharetta which is kind of like a best buy or what used to be circuit city. within just a few months he became a manager of sales. Now here's the problem he has a felony from his past now he has a little boy and girl his life has done a complete 180. and i was curious if you think he would have a chance getting a job with a company like php or something in the financial industry after knowing his record?

  73. That pillow catch was LEGIT!!

  74. Great 👍 video

  75. Focus on value more than profits

  76. Thank for the tips

  77. what about food amd beverage company/factory ? does the same principle apply or there're other methods?

  78. What the hell was in that pillow Pat? 😀

  79. I thinks This vedio is very important for me

  80. I want to know about what is mean grade of concrete and that's use

  81. Because now l m looking for a construction job

  82. For some reason I thought Patrick was Italian until I found out he is from Iran 😉

  83. Another great video! Pressed the Liked button.

  84. Key points you made to invest in your partners and to give value.

  85. Do you have a video on why to pull the money out of a company? Large corporations do it all the time.

  86. Pat you are truly a great person

  87. One of your best videos

  88. Whether you have an existing
    business or are considering starting a business, Michael Gerber in the book,
    The eMyth, suggests the only reason to build a business is to sell it.

    Sadly, many business owners wait too
    long to prepare the business and they do not have enough time to maximize the
    sale price of the business; some never plan to sell and others simply get
    caught off guard by an unexpected illness or unfortunate event.

    To help you not get caught off
    guard, it is best to start as soon as possible to prepare your business. It is
    never too early.

    Here are a few tips to help you
    increase the value of your business over the next 24 to 36 months.

    1. Clean up your books. With "good" accountants, you are likely writing
    off much more than just the required expenses of the business. The value of the
    business is directly linked to the profitability of the business. If you have
    minimized your profitability to decrease your tax burden, you will not maximize
    your selling price. To maximize your selling price, 3-4 years before you
    want to sell, start optimizing your business to maximize your profit.
    This alone can greatly increase the what your business will be worth to a
    buyer.

    2. Note abnormalities that will be adjusted for. When a professional values your business, they will look
    to "normalize" your books, called "recasting." During this
    process anything that was not normal will be removed and this will increase the
    profitability of your business. For example, if you owned a restaurant and had
    to replace the hood system. This cost would be removed because it is not
    "normal" and does not happen every year. Therefore, removing it would
    increase the profitability of your business.

    3. Replace yourself and family
    members with staff. If you have family members working in the business,
    start to replace each one with non-related staff. When a buyer looks at your
    business, the business has less value and is riskier if there will be a mass
    exodus at the time of the purchase. Slowly, replace each family member with a
    staff member that would stay with the business after the purchase.

    4. Secure key employees. You
    will also want to create an employee retention program to secure employees that
    are critical to operations. A new owner will feel more comfortable knowing the
    critical employees are incentivized to stay with the business after the
    purchase and this will make the business less risky and more valuable.

    5. Design your business on
    systems. Every major task in your business should be documented and
    systematized. Although your current staff knows exactly what to do, for the
    buyer, having systems in place assures him or her that the business will run
    without you. Start by documenting the critical functions and then over time
    document all functions of the business. This task is time-consuming, but will
    make a huge difference in the sales price of your business.

    6. Have a growth plan. Now is
    the time to ramp up your marketing, sharpen your sales team and make sure you
    have a solid plan for growth. Buyers pay more for growing flourishing
    businesses than ones that are stagnant. Now is the time to make your business
    look the best it's ever looked.

    By using these tips, you can drastically increase the value of your business and increase your sales price as well as sell the business faster.

  89. 1 million subscribers! Whoo!

  90. I didn't understand ANYTHING. What a fcking waste of time.

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