Independence by Design™ #428: Cutting Through the Noise: Why Free Cash Flow Is the Only Metric That Matters with Ken Sanginario
In a world full of business jargon and complicated metrics, free cash flow stands out as the foundation of value creation for both owner-operators and investors. kXVm3nQBij8
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Ken Sanginario returns to focus on this core principle, unpacking the noise around financial metrics and zeroing in on sustainable free cash flow—cash available after debt, taxes, and working capital. Together, we demystify the jargon that often confuses owner-operators and show how prioritizing free cash flow is the key to growing value over time.
We explore how Ken’s VOP system helps business owners identify where to place their time and reinvestment to maximize value while freeing themselves from the grind of day-to-day operations. By understanding how to measure and optimize free cash flow, owner-operators can shift from being laborers in their businesses to being true owners of a valuable asset.
This episode builds on everything we’ve discussed in recent episodes—valuations, owner-operator goals, buyer goals, deal structures—and ties it to a core principle: sustainable free cash flow is the outcome of a well-run business that creates value with its time, resources, and strategy. If you’re ready to simplify the noise, focus on what matters, and start building a business that works for you, this episode is your guide.
Ken Sanginario is the founder of Corporate Value Metrics and the creator of the Value Opportunity Profile (VOP), a tool that helps business owners identify where to focus their time and resources to grow sustainable value. Ken specializes in simplifying complex financial and operational concepts, empowering owners to take control of their business’s future.
Chapters:
- (00:00) Introduction, free cash flow and business value
- (05:41) Misleading business valuations and multiples in the marketplace
- (08:25) Deal structures and the reality of business transactions
- (12:00) Weighted average cost of capital and business financing concepts, the relationship between debt, equity, and optimal capital structure
- (16:00) How opportunity cost and investment returns inform business decisions
- (24:17) Return on equity versus cash flow metrics, valuing business cash flows and taxation
- (34:32) Analyzing financial metrics and opportunity costs, using IRR
- (41:08) Balancing owner distributions with business reinvestment needs
- (49:40) Connecting financial projections with operational constraints, sustainable cash flow in building business value
- (1:06:28) How business owners navigate expert advice and competing priorities, owner vs. operators
- (1:13:00) Creating sustainable growth through business balance
- (1:15:27) Closing thoughts on improving business owner outcomes and education
- Rate, comment and share with the owner/operators you know!
Ryan Tansom is a seasoned entrepreneur, speaker, and the founder of Independence by Design™, a transformative ownership framework for growth-oriented business owners. After turning around and selling his family business in an eight-figure exit, Ryan spent over a decade dissecting the lessons learned from his journey. His mission is to help other business owners avoid the pitfalls he encountered by providing them with the tools and knowledge to align their business operations with their personal and financial goals.
With a deep understanding of the challenges faced by owner-operators, Ryan developed Independence by Design™ to empower owner-operators to create sustainable cash flow, grow their company’s equity value, and achieve true independence. He has shared his insights on hundreds of stages, including Vistage, EO, and industry associations, and has reached over 500,000 listeners through his podcast.
Ryan is passionate about helping business owners get unstuck from the day-to-day grind and design a business that serves their life, not the other way around.
Resources:
Website: https://www.corporatevalue.net/
Ken Sanginario LinkedIn
VOP Value Growth Software
Episode 426: “Understanding Buyers: How Ownership Structures Shape M&A Goals with Jeff Buettner”
Independence by Design™ Workshop: https://ryantansom.com/independence-by-design-workshop
Independence by Design™ Ownership Coaching: Ryan Tansom’s Ownership Accelerator programs and coaching https://ryantansom.com/coaching
Ryan Tansom Website https://ryantansom.com/
Ryan Tansom LinkedIn https://www.linkedin.com/in/ryantansom/
Ryan Tansom Twitter https://twitter.com/RyanTansom
Ryan Tansom YouTube https://www.youtube.com/@ryantansom
Ryan Tansom 30-Minute Ownership Strategy Call https://calendar.app.google/tsKk7z6ohugDchWq8
Sound Bites
“All the jargon boils down to one thing: free cash flow. It’s what every owner and every investor cares about.” – Ryan Tansom
“Free cash flow isn’t just a metric—it’s the ultimate outcome of a well-run business that uses time and resources effectively.” – Ken Sanginario
“Money is stored time, and time is your most valuable resource. Focus your energy where it creates the highest value.” – Ryan Tansom