Independence by Design™ #407: Where Does the Multiple in Business Valuations Come From (and How to Double It) with Ken Sanginario?
In this episode of Independence by Design™, I sit down with Ken Sanginario, a top turnaround and valuation expert and creator of the Value Opportunity Profile, to dive deep into the fundamental drivers behind business valuations. We explore how the multiple in a business valuation is directly tied to the sustainability, predictability, and transferability of your cash flow—and why understanding this is the key to more than doubling the value of your company.
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Throughout our conversation, we unpack the often-overlooked details that can either make or break your company’s financial future. Ken breaks down critical concepts like the cost of equity, the buildup methodology, deal structures, and how reducing risk plays a major role in increasing your enterprise value. By looking at valuation from both the owner’s and buyer’s perspectives, we provide a comprehensive understanding of what truly drives value and where the multiple comes from.
One of the most important takeaways is that this entire process is within your control: by reducing risk and improving operational quality, you can take actionable steps to increase the multiple applied to your business’s cash flow, doubling the value of your business giving you more freedom and options.
We also explore how making your cash flow more predictable can significantly enhance your company’s potential for reinvestment, growth, or future opportunities. Additionally, Ken and I discuss the challenges of business ownership, the complexities of scaling, and how you can strategically grow your company's value.
By the end of this episode, you’ll have a clear roadmap for taking control of your business’s financial future, with practical insights on how to create sustainable growth through the derisking process.
Brandon Hall is the founder of BGH Valuation Services, LLC, is a seasoned valuation expert with over 2,000 business valuations under his belt. Based in Saint Michael, MN, Brandon holds a B.S. in Accounting from Saint Cloud State University and has extensive experience from his roles at Polaris Industries and Best Buy Corporate. A Certified Valuation Analyst® and Certified Machinery & Equipment Appraiser, Brandon is dedicated to helping businesses understand and maximize their value.[Text Wrapping Break]
Chapters:
- (00:00) – Introduction and Background - Ken Sanginario
- (08:00) – Why Business Owners Must Focus on Cash Flow Valuation
- (15:00) – How Your Cash Flow Increases the Multiple
- (19:30) – Breaking Down the Buildup Methodology
- (27:00) – Strategies to Grow the Enterprise Value of Your Business, Reducing Risk
- (35:00) – Cost of Capital, Understanding the Role of Debt in Business Growth
- (48:00) – Equity Risk Premiums
- (54:00) – Quality vs. Value and the Multiple, Pension Funding through Private Equity
- (59:00) – Cost of Debt
- (1:11:30) – Understanding Company Valuation Metrics
- (1:17:00) – DISC for Business, 8 Primary Functional Categories in a Company
- (1:29:08) - Strategic Ownership Accelerator Discussion
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://corporatevalue.net/
Email ksanginario@corporatevalue.net
LinkedIn https://www.linkedin.com/in/ksanginario/
Resources Mentioned:
Value Opportunity Profile (VOP) – A system designed to help business owners assess and grow the value of their business.
Certified Value Growth Advisor (CVGA) Certification – A certification program for advisors to help businesses maximize their value.
Books:
"Profit First" by Mike Michalowicz
"The Great Game of Business" by Jack Stack
Independence by Design™ Owner’s 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