Momentum Podcast: 243
Instant Equity Increase
by Alex Charfen
Last week, I had massive, overwhelming anxiety. Here's why, I was sick. I was actually sick from before the 1st of July, until about Saturday or Sunday, so over seven days.
It’s important to have a business that’s built in a way that creates value, that makes it worth a high dollar value. What investors want to see is company documentation, they don’t just want to know the end result, they want to know the road you took to get there.
If you can’t provide this documentation, it’s any easy way for your business to lose value. Even if you’ve never considered selling, I want to show you how important having company documentation really is.
Full Audio Transcript
I'm Alex Charfen and this is the Momentum podcast, made for empire builders, game changers, trail blazers, shot takers, record breakers, world makers, and creators of all kinds. Those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy, and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution. Sure, we pay attention to their rules, but only so we can bend them, break them, then rewrite them around our own will.
We don't accept our destiny, we define it. We don't understand defeat because you only lose if you stop and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate there could be a better future and instead of just daydreaming of what could be, we enter the vulnerability and exposure it takes to make it real. We are the evolutionary hunters. Clearly, the most important people in the world because entrepreneurs are the only source of consistent positive human evolution and we always will be.
Instant equity increase. In my line of work, I end up talking to entrepreneurs all the time about the equity value of their company. Now, I want to make something very clear, in my opinion entrepreneurs should rarely, if ever, sell their business. If your business is saleable, that means it's an opportunity for someone else it could be an opportunity for you. Yes, I know that there's situations where you have to sell, but I always try and convince my clients not to sell. You know, there's some businesses that just shouldn't be sold.
The Walmart family still owns a ton of Walmart. Monster Cable is still owned entirely by Noel Lee. Bose is owned by the Bose family, and there's a reason Tabasco is still owned by McKinley family because if you have an incredible business that can go on for generations and generations, I don't ever want you to sell it. I want you to keep it in your family. I want you to let that business grow. I want it to become a legacy for you.
However, all of that being said, I still think company valuation is important. It's important to have a business that is built in a way that creates value, that makes it worth something, that makes it worth a high dollar value. When you look at how businesses are evaluated, most of the time it's an investor, a VC, somebody who is going to bring money in, somebody who is going to put in capital, a banker.
These days there is a new wrinkle in how companies are being evaluated. It's this new phrase that you'll hear a lot called company documentation or ongoing company documentation. What investors, bankers, VCs, venture capitalists, what all of them want to see is company documentation. The last time it was described to me by one of them they said for a long time we just wanted to see the sausages, the end result, but then we realized after a while the industry ... That business is shifting, that results are the only thing we need to see. In fact, we want to see how the sausages are made.
This isn't just with investors and bankers and VCs. Often time board members, people who are advising, they want more information from your company so that they can help you in the greatest way. Now I first found out about this probably six or seven years ago when I was working with an organization that was looking for venture capital. They either wanted to bring in venture capital or they wanted to sell, so they were working with both VCs and bankers. After just a couple of months, what we discovered was everyone that they talked to wanted a much greater level of documentation on their company. Not just the prospectives, not just the results, not just the profit and loss statement, but they wanted to know how did they get there.
Now here's what was so magical about this situation. In most companies trying to provide documentation about how you put stuff together is near impossible and bankers, venture capitals, and venture capital people, investors, they know this. They ask you for the documentation as a way to knock down valuation. In fact, several of the people in this business have told me yeah, you know, company documentation, it's great when they have it and when they don't it's a way for us to easily adjust the valuation of the company, which means pay you less money.
Even if you're never going to sell, even if you've never considered selling, I want you to see how you can have full company documentation, make your business more effective, make your business more efficient, clarify everything for your team, and do this all at once because the systems that we've created as an organization actually go above and beyond what any investor, any banker, any VC, would want to see as far as company documentation.
Because here's what the Charfen cadence does for a business, it will increase your equity exponentially by helping you do more, by helping you sell more, by helping you market more, by helping you build your team, by helping you draw your team closer together, create a movement, get more referral business, become the leader in your category. That will happen if you use our systems, however, along the way because you're using a communication structure where each month your team knows where they're going, each week everyone of your team members does a weekly report, each week as a team you get together and you create your commitments.
You have documentation around where you were planning on going, what commitments you made, what you achieved, what you accomplish, and what you didn't on a monthly basis. Twelve times a year, you can show a set of outcomes that you aimed at and where you ended up. You can show how predictable your projections are, your goals are, your forward planning is, and over time you can hand an investor the entire history of what you planned on doing, what you actually did, what the difference was, and where your success is today, all in a system that brings your team closer and creates massive clarity.
This is a game changer because if you're looking to build your business in a way that's going to keep it financially stable, then you have to have a communication system where your team hears from you in a cadence that they can trust and that they understand. If you want to grow your business as fast as you possibly can, when everyone knows where you're going, it gets that much easier, but if you also want to create massive equity in that business, this same structure will do exactly that for you.
A few years ago, that company we were dealing with, here's what they did when they were asked for documentation. They went and printed about a year and a half worth of the planning documents that we helped them put together. They printed the planning documents as to what they gave their team, as to where they're going each month. They printed the results meeting that they held with their team each month, and they gave it to their investors.
What I heard back third party, not directly, but third party was, that the investors had never seen such a high level of documentation for any company and they wondered how much it cost the organization to keep that level of documentation going. Well when we sat down with the investors and we explained to them that not only did it cost nothing additional to have that level of documentation, but that was in fact exactly how the company planned their forward progress and executed, they were blown away.
We ended up working with a few more of the companies that that investor group had purchased an equity in. We ended up advising them at the COO and CEO level and helping them use our systems with some of the other organizations that they had put money into because there's nothing out there like what we have. There's nothing out there that will give you an instant equity increase, will clarify things for your team, will give you a forward planning system, and a strategic plan to get there along the way.
If you're growing your business to make the maximum impact you possibly can, then you owe it to yourself to be on a communications cadence. If you're growing your business to have your team be as productive and as successful as they possibly can, then you owe it to yourself to be on a communications cadence. If you're growing your business to have the maximum value it possibly can, regardless of what type of exit you're looking for, if you're thinking about maybe someday possibly you want to or just as importantly, maybe someday possibly you might have to, that's what I always guard against.
I want any one of my clients, whoever has to pull the trigger and sell, to be able to immediately get the maximum amount they possibly can for the business that they have created, and when you're using our systems, you are building that equity as you go. You are building the value as you go. You are building full company historic documentation and results as you go. If you're growing a business to pass it on, if you're growing a business to sell it, if you're growing a business to exit, you owe it to yourself to look at getting on a communications cadence.
If not ours, someone else's, but I'll be honest with you, there isn't really any other good ones out there. No one does what we do, so if you're looking to build the maximum value in your business and grow it as fast as you possibly can, you owe it to yourself to reach out to us. Take a minute now and go to billionairecode.com and answer a few questions from my team and I and you'll have an opportunity to set up a call with one of us. Because if you're looking to grow your business faster than it's growing today, if you want to make sure that as you do that, you are taking care of your team and you are maximizing every penny of equity you possibly can, contact us, go to billionairecode.com, and let us help you.