Script for the Price/Value video on Vimeo.

1. Price/Value Script
1 of 3
You will exit your business. But,
Don’t go yet—not until you understand what your end game is and how much the prize is.
I’m Paul Menig and I’ve had the opportunity to work with business from startups to Fortune five hundred
international companies. In the process, I’ve learned a few things that you’ll find of interest and value. I’ve
even written a book about it that is readily available at Amazon and Barnes & Noble in either paperback or
electronic format.
I’ve learned of three to seven ways to exit a business. You may be standing tall and vertical, laying down
horizontal, or just close the door. In the vertical category, you may choose to sell to a family member, one of
the people working in the business, to another privately owned company, individual, or private equity
company. And, in a few instances, you may choose to go public and sell the company to lots of shareholders.
The horizontal departure happens all too often as the owner gets sick, then dies, leaving the business to a
spouse that ill prepared to run the business successfully. Finally, I’ve seen a number of people just close the
doors on their business. They had visions of selling it to create or add to their wealth. Unfortunately, their
business, like nearly 70% of business that are put up for sale, never did sell.
Most people who own businesses want to exit and leave on a high note. They should be running to the next
stage of their career and life, not running away from the rigors of the business. Some things they may run to
accomplish are money for their retirement and more time for their family and hobbies. They may be a serial
entrepreneur and want to try something new and different. I’ve seen many people that want to exit and secure
the future of the company and provide jobs and security for their workers. Some want to leave a legacy of a
well run company or donate proceeds to charity. Getting ready to exit is as much a mindset as it is the
financials and strategy of the company.
When CEOs are talking, the most often talk about wanting to grow the business in both revenue and profits,
they want to make it easier to run so they don’t spend all day, night, and weekends keeping it going, and they
want to prepare the company for sale as part of their exit strategy and go on to the next phase of their life as in
the previous slide.
Therefore, there are three dimensions of growth that they want. They want to immediately grow profits and
cash flow. In the medium term they want to increase revenue. Ultimately, they want to grow the transferable
value of their company for that vertical exit.
Put it all together and you get Growth in three dimensions of profits, revenue, and value. But, there is one thing
missing in this diagram. Investors and those that purchase a company need to be assured of the growth and that
there is little risk that it won’t grow more valuable. They need all three dimensions to be
Predictable.
Let’s start by looking at some financial scenarios in the lower left, then the lower right, and, eventually, at the
top.
Suppose you have a pretty good company with one million dollars in sales, four hundred thousand dollars in
gross profit with a forty percent gross profit margin. You control your overhead costs really well and have a

2. Price/Value Script
2 of 3
net profit of two hundred fifty thousand dollars for a net profit margin of 25%. The easiest thing to do is lower
your overhead costs.
Without getting into the nitty gritty details of the costs, a five percent decrease in overhead costs, without any
other changes, will increase your net profits by three percent.
Assuming you can find a way to reduce the cost of sales for your goods and services, something that is getting
harder to do, a five percent reduction in the cost of goods sold produces an even better return of twelve percent
increase in net profits.
In the other circle, we can look at increasing revenue by five percent. At first cut, we will assume that your cost
of goods sold as a percentage is not impacted and remains at forty percent. Not as good as decreasing the cost
of goods sold, but still a healthy eight percent improvement in net profits. What if we combine some of the
improvements?
If we increase revenue and decrease overhead, we can achieve an eleven percent increase in net profits.
If we can almost magically improve revenue, cost of goods, and overhead each by five percent, then we can
attain a whopping thirty-vie percent increase in net profits. That would make a lot of CEOs happy. I’m sure
you’ve noticed that big gray box at the bottom of each slide and are wondering what’s behind the curtain. Well,
that’s the top box of enterprise value or transferable value.
Going back to the beginning, a company with two hundred fifty thousand dollars in net profit is possibly worth
one million dollars assuming a buyer is willing to pay four times the net profits. That’s a pretty slow return on
their money of four years to recoup their investment. Often that number is only two point five times the net
profit, EBITDA, or Seller’s Discretionary Cash. There are many things that affect that multiple such as region
of the country, type of business, and other health factors of the business.
To give you an idea, we’ll talk briefly about eighteen of those health factors for your company that affect its
transferable value. Some are based on the market you are in and some are based on how you run the business.
Here’s a bit more information on each of the market drivers. Don’t worry, you’ll be able to access these slides
on Slideshare at any time.
And, here’s some more detail on the operational drivers for your company. Now, let’s look at some
conservative possibilities for the company by affecting the multiple and the transferable value.
I hope blanking out some of the details of the charts and bolding some numbers makes it a bit easier for you to
follow. We started with a one million dollar business with two hundred fifty thousand dollars of net profits and
a multiple of 4 producing an enterprise value of one million dollars. It’s just happenstance that it is one times
sales. Don’t walk away with that in your head for all businesses. If the company worked on one or more of
those eighteen drivers, they could increase the multiple to six times net profit giving an enterprise or
transferable value of one point five million dollars. A wonderful fifty percent increase in value. You can see
the important numbers in the other columns. It is possible to go from one million dollars, or less, in
transferable value to over two million dollars in a couple of years by improving on the eighteen drivers of
value.

3. Price/Value Script
3 of 3
Now, suppose you choose to exit vertically, standing tall, by selling your business with the help of a broker.
Brokers do a lot of work and expect to receive a commission on it. That commission varies. I’ve chosen to use
a ten percent commission as a midpoint for lower middle market companies. Even with that, the amount of
money you take out of the business for working on the eighteen drivers and improving the transferable value of
the company is substantial.
So, how do you determine how you are doing on those eighteen drivers and where to focus the improvements?
If you are ready, know the number of employees you have, the company revenue. your profits and the special
code, the NAICS, you are ready to find out the answer to that question.
By answering just eighteen questions in as little as ten minutes, you will get a report of the value of your
company and where you are on the eighteen drivers. It’s free and confidential. Now, go to mycorevalue dot
com slash discover slash go slash business hyphen accelerants hyphen advisor to get started and get your
results immediately.
If you’d like to talk about your results, go to calendly dot com slash paul hyphen ba to find a time to talk by
phone, zoom, facetime, or in-person.
Thanks, and have a great day.