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Dec. 12, 2022

Dave Bookbinder On How To Thrive And Prosper When You Go Behind The Numbers To Master The New ROI (#185)

Dave Bookbinder On How To Thrive And Prosper When You Go Behind The Numbers To Master The New ROI (#185)

“Fundamentals matter.” - Dave Bookbinder 

Dave is a Managing Director at B. Riley Advisory Services, with a focus on business and intellectual property valuation. Known as a collaborative adviser, Dave has served thousands of client companies of all sizes and industries. 

Dave is the author of a #1 best-selling book about the impact of human capital (PEOPLE!) on the valuation of a business enterprise called The NEW ROI: Return On Individuals. 

Dave is also the host of Behind The Numbers, the show that digs deeper to understand what matters most in business. The show is enjoyed in 74 countries and ranks in the top 5% of all programs globally.

Dave writes about finance and leadership as a contributor at CFO University, TLNT.com, Thrive Global and the Enterprise Engagement Alliance. He is also a former contributor to the business section of the HuffPost.

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Your liquidity event is the most important financial transaction of your life. You have one chance to get it right, and you better make it count. 

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Transcript

[00:00:00] Jeffrey Feldberg: Welcome to the Deep Wealth Podcast where you learn how to extract your business and personal Deep Wealth.

I'm your host Jeffrey Feldberg.

This podcast is brought to you by Deep Wealth and the 90-day Deep Wealth Experience.

When it comes to your business deep wealth, your exit or liquidity event is the most important financial decision of your life.

But unfortunately, up to 90% of liquidity events fail. Think about all that time and your hard earned money wasted.

Of the quote unquote "successful" liquidity events, most business owners leave 50% to over 100% of the deal value in the buyer's pocket and don't even know it.

I should know. I said "no" to a seven-figure offer. And "yes" to mastering the art and the science of a liquidity event. Two years later, I said "yes" to a different buyer with a nine figure deal.

Are you thinking about an exit or liquidity event?

Don't become a statistic and make the fatal mistake of believing the skills that built your business are the same ones to sell it.

After all, how can you master something you've never done before?

Let the 90-day Deep Wealth Experience and the 9-step roadmap of preparation help you capture the best deal instead of any deal.

At the end of this episode, take a moment and hear from business owners like you, who went through the Deep Wealth Experience.

Dave Bookbinder is a Managing director at B Riley Advisory Services with a focus on business and intellectual property valuation. Known as a collaborative advisor Dave has served thousands of client companies of all sizes and industries. Dave is the author of a number one bestselling book about the impact of human capital on the valuation of a business enterprise called The NEW ROI: Return On Individuals.

Dave is also the host of Behind the Numbers. The show that digs deeper to understand what matters most in business. The show is enjoyed in 74 countries and ranks in the top 5% of all programs globally.

Dave writes about finance and leadership as a contributor at CFO University, TLNT.com, Thrive Global, and the Enterprise Engagement Alliance. He is also a former contributor to the business section of the Huffington Post.

Welcome to the Deep Wealth Podcast and every episode is always a terrific one. But this one, this particular episode with this guest, you heard a little bit about him in the official introduction.

We're gonna knock your socks off with what you're gonna hear today because our guest is a best-selling author, thought leader has been involved in M and A. But he looks at things in ways most people don't. And as I like to say, there's always an art and a science when it comes to a liquidity event, your deal.

We're gonna talk a lot about that today and beyond that. So Dave, welcome to the Deep Wealth Podcast. It's truly a pleasure to have you with us and you and I, we've been just chatting offline and the wheels have been spinning for me and so terrific to have you here, but let's start at the beginning.

There's always a story behind the story. Dave, what's your story? What got you to where you are today?

[00:03:21] Dave Bookbinder: Great to be here. Thanks for having me by the way, Jeffrey. My story is this. I grew up in the M&A space, so I've helped client companies in figuring out the buying and selling of their businesses, but underpinning, all of that was valuation. And at some point during my career, I decided that the valuation component was really more intellectually gratifying for me.

So I pursued a few professional designations had the opportunity to grow up in valuation consulting and launch and lead some practices. And I'm currently a managing director at B Riley Financial. Throughout my career, addition to valuing businesses have also valued intangible assets. And one of those intangible assets is human capital.

And I never really thought that the methods that we in the valuation profession used told the whole story and the accounting profession doesn't recognize the value of people. Obviously, they're not on a balance sheet for those who don't know. And I'm basically on a mission to, to try to change that.

[00:04:14] Jeffrey Feldberg: Wow. So you've really been in the thick of things, but I love what you've done in terms of looking at people in particular, especially when it comes to evaluation, and your book, The New ROI return On individuals is something I'd love to learn more about. And you know, what, if I can let the cat out of the bag by the time this episode airs, you're also gonna have another book.

Perhaps we can talk about that. But first things first, let's talk about valuations, and then let's put people into the valuations. So from a valuation perspective, when you're looking at a business, what do you think our listeners should know that they're probably not going to hear from other people but is so important for them to keep in mind?

[00:04:53] Dave Bookbinder: Yeah, their most valuable asset is their people. Every CEO on the planet, pounds, the table, and says that our people or this company's most valuable asset, but then it, I don't always necessarily behave that way. And not because that they're bad people they've got nefarious intentions or anything like that. The reality of matter is that people don't show up on a financial statement.

They're not on a balance sheet. We say they're the most valuable asset, but yet they don't actually appear that way. So they're treated more as expenses that you try to reduce than assets. You try to invest in.

[00:05:24] Jeffrey Feldberg: Well said. And so for our business owners out there, they're thinking of having at one point a liquidity event, and Dave, to your point, the accountants are well, you know what your payroll is weighing you down here. How do we do something that doesn't necessarily show up in a balance sheet. What can we do with our people? As we head into a liquidity event, we wanna really put our best foot forward from our people perspective, from an ROI perspective, what does that look like?

[00:05:50] Dave Bookbinder: Yeah, let me give you the perspective from the buyer. First of all, because depending on where you get your statistics, anywhere between 75 and 90% of M&A transactions do not produce the intended synergies. In other words, that one plus one equals three that you're supposed to get when you put the two companies together.

And the number one reason for failing to deliver those synergies is poor integration of the people, the human capital. So if anybody out there has been involved in a transaction, if their business has been acquired, perhaps then they may have experienced something like that, where the integration process doesn't go quite smoothly.

You start to experience turnover. And as we like to say, your most valuable assets are the ones that get on the elevators every night.

[00:06:31] Jeffrey Feldberg: And so knowing that then as we're going through liquidity event, and you're speaking our language, Dave, with those percentages, because we throw the same percentages out there. You know what, step number three of our 9-step roadmap, future buyer talks all about how do you think like a buyer let's stop thinking selfishly as a business owners, as a seller, put ourself in the shoes of a buyer.

So in your experience, Dave, from an M&A background and doing the deals and also focusing on human capital, What should I be doing as a business owner, heading into my liquidity event for my investment banker's benefit for the future buyers benefit, where I can really highlight the true ROI and the value of our people.

[00:07:10] Dave Bookbinder: Well, As a practical matter, the things that the buyer will appreciate first and foremost is what I'll call a succession plan inside the business. So that if you've got an owner/ CEO, If they get hit by the proverbial bus, there's someone else who can step in. You've got some kind of depth of management, but in terms of the overall organization, and as you allude to the ROI, it's about having a good culture in place. It's having the people all engaged and that's a whole different subject for another conversation, but it's building a culture where people are invested and you're getting the discretion area for not to manifest itself into the key metrics that buyers are gonna look for.

And the sellers are gonna want to demonstrate like greater sales, greater EBITDA.

[00:07:49] Jeffrey Feldberg: And you mentioned that infamous C word culture. It's so important. And as we like to say here at Deep Wealth, money buys lots of things. Your wealth capitalized competition, they can copy your technology. If they're really good, maybe they'll even hire away your people, but they can't buy your culture.

And I would even take it a step forward with a really unique culture. That's rich, it's thriving, it's doing all the right things. They're probably not gonna be able to hire away your people either. So from that perspective, you've highlighted. Okay as a business owner, I can highlight succession planning.

Hopefully, the business runs without me, which is a fatal mistake. Too many business owners make out there and I'm putting my best foot forward in terms of why my people are so good, Dave, but let's talk about culture for just a moment again, in your experience. What can we do to really get the best out of our culture?

Or maybe another way of asking that when you look at businesses because you're at B Riley Advisory Services, you see all kinds of deals, day in, day out, where are we going wrong as business owners with our culture?

[00:08:51] Dave Bookbinder: Let me first offer you this Jeffrey, if you don't mind from the business owner's perspective before they sell. Think about the legacy that they wanna leave behind for their team and their people. I've seen the number of transactions where business owners have taken a few less dollars in their pocket to maintain their teams because it was important to them that the jobs were maintained and their employees who were like family to them didn't get axed.

So in terms of the things that business owners can do to start to improve their culture, there's a number of different things that I've heard from CEOs that I've interviewed both on my show and for my books. And it really starts with being intentional. They have to want to do it. It takes time to do it.

In other words, a CEO, can't just say tomorrow, okay, we're gonna have a good culture here, guys and gals and people are gonna buy into it. They have to demonstrate behaviors that are things like transparency, appreciation, empathy, all the soft skills, but they matter because your people really do want to be appreciated.

And when they feel appreciated, they'll give you that extra effort.

[00:09:51] Jeffrey Feldberg: You know, as you're talking about that Dave, it reminds me it's a Glassdoor study that was done and they asked employees, what do you value? What's gonna have you leave your position, go to another position, another company, or even stay in your position when you get an offer to go away to another company, another business?

And at the top of the list to many people's surprise, it shouldn't be a surprise. It wasn't money. Money was four or five on the list at the top of the list. It was well, what's the quality of leadership? What's the vision of the company? What's the company gonna be doing to your point to really make it interesting?

Are they being heard? Are they being able to really go deep within and bring their best to the business, to the stakeholders, to the marketplace? And make that difference. And so in terms of being intentional, having that empathy, all of those things of leaving a legacy, you know what, again, Dave, we're on the same page here we call those deal points and no-fly zones.

So before starting your liquidity event in the 9-step roadmap again, step number three for the future buyer, we really encourage business owners. Okay. Before you start, what do you absolutely wanna have in the Three to five big points and, you know, always small little points in between, but three to five big points?

And then absolutely not. What would have you walk away from the table if these three to five points, these no-fly zones were there? And so to your point, when you have that kind of clarity, it really makes a difference when speaking with a buyer because you know what you want, and what you don't want, and you're making the buyer's life a whole lot easier.

And Dave, talk to us a little bit more about the ROI of people because that was a whole book that you wrote and it's really become your wheelhouse, your hallmark in terms of what and how you think. You know, what else should we be thinking about and knowing when it comes to our people, being the ROI for our business?

[00:11:38] Dave Bookbinder: Yeah. So the first book was my journey to demonstrate and prove my thesis, that people really are a company's most valuable asset. And I actually never intended to write that book. Jeffrey, I wrote an article and it caught traction and people started to encourage me. I need to do more. And long story short, it ultimately had to become a book because there was so much content that ultimately accumulated.

The second book happened the same way, but it's a kind of compendium of the conversations that I've had on my show behind the numbers. But here's the big thing I would wanna share. And that is when I tell you that people are your most valuable asset and it really moves the needle in terms of overall returns, I'm not just making this stuff up.

There are people who are way smarter than I have that have done a lot of empirical data on publicly traded companies. I'm gonna share with you something that I talk about in the new book and it involves something called the human capital factor that a group called irrational capital have developed, and they've partnered with Harbor capital to release an ETF, an exchange-traded fund called HAPY.

And the happy fund is based upon the underpinning work of that human capital factor, which is essentially an analysis of, and surveys of human people, human employees that were surveyed around areas, things like appreciation, for example, and back-tested data by JP Morgan to demonstrate that companies that demonstrate for instance, appreciation will outperform their peers.

And when every one of these individual criteria, you start to see how much the human capital impacts the outperformance relative to other firms that aren't doing the same kinds of things. So there are other companies that are out there doing something similar, just capital as another one, and you've seen best places to work surveys and how those companies outperform.

So it's not just me that it's talking about this. There are other folks that are actually have demonstrated that it isn't actually even an investible strategy.

[00:13:31] Jeffrey Feldberg: Wow. And fascinating appreciation again is never gonna show up on a balance sheet. You're not gonna find that in a complicated formula, in a spreadsheet. And when you think about it, appreciation doesn't really take much time nor money to do, but it makes all the difference of people feeling heard and wanting to say at the company, wanting to make a difference.

So Dave, tell us a little bit more about the second book again because, by the time this episode airs, it's gonna be out there. What's it all about? What's firstly, what? Let's start with the title. What did you call it?

[00:14:02] Dave Bookbinder: So it's a mouthful. It's The New ROI Return On Individuals, which is a trademark thing now. So that's why I maintained that to stay on brand and the subtitle is Going Behind The Numbers. And it's stories and conversations that I've had with various guests, thought leaders, business owners who have been on my show, which is called Behind The Numbers.

And these stories are all demonstrating different ways that these leaders have either facilitated or actually implemented cultures that have made a big difference in the lives of their clients and other companies.

[00:14:35] Jeffrey Feldberg: Dave, firstly I wanna give you a compliment and appreciate you and what you're doing. I love your play on words with this title, which takes into account your podcast and your whole thesis. And your other book is just such consistency that goes along with that from the book, is there a story or two that you can share with us?

I would illuminate what's been going on behind the scenes with your research and your work.

[00:14:58] Dave Bookbinder: Yeah I shared one about the investible strategy piece and that's key because that quantifies and makes very clear that there are others who are out there who have done really rigorous data testing on this thesis. So that's one component, but the rest of its various stories. One that's particularly interesting is the story of how leadership in the military translates into leadership in the business world, for example.

They're more similar than you would think when you think about the concept of servant leadership and, Simon Sinek, I think brought the idea forward pretty visibly in Leaders Last. The premise was from the military. That's where he got that term from. And it is really fascinating when you talk to leaders from the military who are now in the business world, what they've been able to do in taking their leadership styles and what they've learned in the military and translating it into the business world.

[00:15:45] Jeffrey Feldberg: With your new book out with your podcasts, Going Behind the numbers with what you're doing as a thought leader, But you're also an Advisor at an advisory firm and you're seeing deal flow. So really you are seeing a whole lot from different points of view and different aspects. And I'm wondering again because it's a Deep Wealth podcast after all.

If we could leverage that. And let me ask you this, it's a little bit of a thought experiment here. If I was a business owner and Dave, I'm coming to your firm either to yourself or some of the other advisors there, and you're gonna be taking me to market to sell the business. And you're looking at my company and I know this, you can say, Jeffrey, every company is different.

Every deal is different. And you're absolutely right. But I also have seen, Pareto's law that probably 80% of the challenges that we have in deals are coming from 20% of the same issue. That go across businesses. Yes. There's always outliers and always things that are a little bit different, but what would you be telling us that if this was a typical business, wasn't necessarily the best prepared, successful business, but they didn't really do the preparation just showed up and you're now taking a look you're kicking the tires, so to speak before any buyer steps onto the scene, what would be a few things that you've seen over the years and with your thesis on the ROI of people who can combine that, what typically would you be saying?

[00:17:10] Dave Bookbinder: Well, I think you struck the chord there when you said not really prepared. And over the course of my career, I've gotten a lot of those phone calls where people are telling me, Hey, I think I'm gonna be selling my business. I need evaluation. Actually wrote an article a couple years back called Thinking of Selling Your Business Here's Five Things you Need And one That You Don't, and the one that you don't was evaluation, I can add a lot of value in providing good rigorous valuation analysis. But if we're talking about a sale of the business and it's imminent, in other words, in the next six months, let's say now we're already too far down the runway.

We're putting the for sale sign in the front lawn to use a house analogy. And now it's about just getting the realtor, involved getting the investment banker or broker involved, and doing the best they can for the auction. Because my theoretical value at this point in time isn't really gonna be beneficial for you.

You're there. If you give me a couple of years in advance, then I can talk to you. I can work with you and give you analyses of not only well-supported but insights into your business and where you stand relative to your peers. So you can start to look at your sales growth relative to your peer sales growth, your margins, versus the peer's margins and things like that.

Then we can have a different kind of conversation, but if you're at that, I can say at that, oh, shit moment where you have to sell, then damn the torpedoes. And off you go.

[00:18:28] Jeffrey Feldberg: And, for our listeners, I promise you, Dave, and I never rehearsed this because Dave, what you're saying is what our listeners hear me say, like a broken record time and time again, preparation is the gift that keeps on giving. Give yourself 12 to 24 months. So that on your own time, you can prepare you and your team.

You're not gonna sacrifice your health, your money nor your time. And you're gonna show up with a more resilient company, likely a more profitable company, and you're gonna get that higher enterprise value. So preparation in your books like it is in our books is key. Let me ask you something, Dave, we talk a lot about valuation.

We don't do valuations ourselves here at Deep Wealth. We leave that to other professionals and advisors, but let me ask you, because other evaluators have shared this with me and it came as no surprise to me, but for listeners in the community, and we can put some of the links in the show notes for some of those episodes.

We're hearing a lot from evaluators of, you know, what? I don't even look at the numbers. The first thing I look at is what's the narrative of the business. There's a narrative capture my imagination. Yes, it has to be backed up by facts and data, and numbers. And you need that. But if it's not an interesting narrative that's gonna definitely affect the valuation.

Where are you on that? Do you buy into that? Do you not buy into that?

[00:19:38] Dave Bookbinder: I think it's a combination of both. I think that's probably the first place the investment bankers would start. Cause if I'm wearing my investment banker hat, I wanna know what the narrative is so that I can figure out how I'm gonna pitch the business, but wearing my valuation hat. It really starts with the numbers.

[00:19:54] Jeffrey Feldberg: And so you're starting with the numbers. You're blending that with the narrative. And is that really the combination of the two? Are they equally weighted in your books, Dave, or where, how would that take you?

[00:20:05] Dave Bookbinder: Here's what I would say to that Jeffrey. So I would more or less bifurcate it into what have you done historically. So, deep conversation about that. Where's the business been, but valuation really is a forward-looking exercise. So it's not enough to say that you're worth, I'm gonna pick a number here, six times EBITDA from last year.

But what does EBITDA look like next year? And the year after that? And the year after that, what's there you get into more of the narrative, I guess if you will, what's the future going to look like? Because there's a couple of different ways that we would value that business. One might be certainly using the historic multiples as I just alluded to, but also forward-looking multiples, but perhaps even more importantly is a method called the discounted cash flow model, where we take a forecast of the business for the next five or 10 years.

And go all the way down to free cash flow and bring those benefits back to today's dollars at an appropriate level of risk. So what does the future look like? And here's a quick nugget for the audience, as they're thinking about maximizing their evaluation in terms of an Exit sale. It's really about de-risking the business.

Anything that you can do, I think to demonstrate that you are de-risking, the business will increase your valuation in the eyes of the buyer. So when you're making that forecast, it's gotta be well documented and well supported. It can't be the hockey stick. When we start talking about having that succession plan, when we start talking about having a solid narrative so that the underpinning assumptions of that forecast make a whole lot of sense, buyer starts to get comfortable with it.

And in their mind, it's a little bit less risky than maybe they otherwise would've envisioned. And that translates into dollars.

[00:21:42] Jeffrey Feldberg: And David again, you're speaking our language, what we often say to the community and for the more straightforward logical people, they have a hard time accepting this. This has been our experience. This has been my personal experience in my own liquidity event. We're all people. Sellers were people as buyers were people as investment bankers were people.

And I love your thoughts on this, that as people, we tend to make decisions, even big decisions on emotion first, and we justify it with logic later and in the art side of a liquidity event, where that becomes important. Obviously, you have to back up the narrative with data and facts, but if you have an exciting narrative that you can back up, that paints a very bright and prosperous future for tomorrow because Dave, you hit the nail on the head, buyers know what you did yesterday.

They know what you did today. They wanna know what the business is gonna do tomorrow. And for many years to come because they wanna minimize risk, they wanna maximize the profits. And when they get that narrative, that excite. Can really help to elevate enterprise value and through a competitive bidding process, leverage that to even get the multiples up higher would love to hear your commentary and even experience with that.

[00:22:49] Dave Bookbinder: Yeah, I'm a big fan of the auction. I know there are a lot of business owners out there who may be listening and thinking. I really don't wanna pay an intermediary, sell my business. I know everybody who's in my space. I'll just reach out to them and talk to myself and negotiate my own deal.

And my advice to them would be that if you've never done it before, or you don't do it on a regular basis, you're hurting yourself. You're leaving money on the table. When the buyer gets that confidential information memorandum, and it has number 18 in the upper right-hand corner, they know that you're running a real process, a formal process.

Other buyers are seeing the same information that they. And if there's an interest in buying this business, they're gonna have to step up and really put their best feet forward.

[00:23:29] Jeffrey Feldberg: Absolutely. And then Dave, to your earlier point when you show up prepared. So as an example, you already done a quality of earnings report. You've done your data privacy report. You have your audited statements through that preparation and a competitive process. You can limit the amount of time that you're in market.

Because as we both know, speed wins, especially when you're selling a business, you never know what tomorrow brings you want to be in and out of market as quickly as you can. So everything that you're saying,

[00:23:57] Dave Bookbinder: Yeah. And what you just alluded to also speaks to the de-risking of the business or reducing the risk of the business. When you start thinking about having audited financial statements, as opposed to handing somebody a spreadsheet that you generated internally.

[00:24:07] Jeffrey Feldberg: Yeah, absolutely. And for our listeners out there, and you've heard to say it time and time again, you should not have a liquidity event with yourself or, hey, my brother's best friend has a little bit of experience in this charges, the right rate.

Maybe I'll put it to him. You've gotta go out and hire an investment banker again, that you can't master something you've never done before. Investment bankers, Dave, and his team. This is all they do all day, every day. They know a thing or two about this. They've mastered the game and through them, you're gonna leverage that.

You're also gonna get more respect from the buyers when they see that, Hey, They've prepared. They've got professional representation. I better be on my best behavior because it's not just me. There's other buyers that are here. And Dave, our listeners are gonna get the point.

Unsolicited offers, forget about them. Don't even look at it, get the professional representation, get an investment banker and take yourself to market.

[00:24:57] Dave Bookbinder: Yeah, that investment banker is one of the five things I recommend that you need if you're thinking of selling. And it's funny that you mentioned. You know, your, Your brother may have given you advice because I refer to get yourself a real attorney, a deal attorney, not your brother-in-law, the personal injury attorney.

[00:25:12] Jeffrey Feldberg: Absolutely, here at Deep Wealth, even before speaking to an investment banker, the two advisors that we recommend, every business owner gets number one is a Chief Exit Advisor. And to give us a little bit of a plug here, the 90-day Deep Wealth Experience teaches business owners to become their own Chief Exit Advisor.

Or we can become a Chief Exit Advisor or there's others out there, other investment bankers or business people, or M&A lawyers, but then to get specifically Dave, to your point, not any lawyer, not a business lawyer, not your real estate lawyer, but an M&A lawyer who does deals all day long.

And not just again, not just any M&A lawyer, when's the last time they did a deal? How many deals have they done? What's the size of the deal and we can go on and on, it's getting the right person in the right seat on the right bus. Because again, Maxwell, Maltz is quote, love it. When the team works, the dream works.

And if you want success for your financial freedom, it's the team that you put together. That's ultimately gonna make the difference.

[00:26:07] Dave Bookbinder: 100% and they all have to be talking together. They can't operate in different silos where you, the business owner are pulling the strings if you will. That's the time where you've gotta let go of the rope just a little bit and let the team operate. You're still involved in a very significant way for sure.

But they all have to be talking to one another so that they can work in your best interest.

[00:26:28] Jeffrey Feldberg: And Dave, this is again more on the art side of a liquidity event. We'd love to hear your thoughts on it. You can't always do this, but what we always recommend for business owners is, hey, when you're bringing on board your Advisor. If you can try and find the advisors who successfully have worked together, that combined, they have a track record of success.

They know each other, they have a very cordial relationship. Maybe they're even friends who knows, but when they've worked together, they have that comfort level with each other. And again, you can't always do that, but when you can, at least we found it's just a smoother process and you tend to get better results because you have a level of trust.

That's hard to get otherwise thoughts on that.

[00:27:08] Dave Bookbinder: Yeah I would agree it's more seamless. They've all been through the wars together. They know each other, they trust each other. So yeah, I would. I would definitely concur with that. And I think it's maybe a little bit easier than your audience might think. If they allow maybe their Exit Advisor to help facilitate some introductions for folks that they've worked with in the past.

[00:27:26] Jeffrey Feldberg: And the old saying birds of a feather flock together, and that saying's been around for thousands of years for a good reason. A players tend to surround themselves with other A players and people who have the right mindset and winning mindset. Dave, I wanna talk about B Riley Advisory Services, but before we get there, let me circle back to one other point because we've been talking about people and the ROI that people bring.

And would love to hear your thoughts on I'm now bringing people on board to my company it's growing and I have to fill some seats. What should I be looking for? Are there some insights or wisdom that you can share with us of different kinds of traits that I should be looking for in people?

[00:28:06] Dave Bookbinder: Yeah. And I'll tell you that there's some scientific tools that are pretty inexpensive and easy to use that probably would help you make decisions. So most people aren't great interviews. And they oftentimes get surprised and a bad hire is very expensive. So you can de-risk that. I talked about one such tool in the first book, predictive index and a good friend, Dave Nast who I happened to know for many years gave me a very thorough tour of the predictive index and what that means in terms of my own evaluation.

He put me through the ropes and it doesn't take long to do the assessment, but it's super accurate. And in relatively no time at all, he was able to figure out exactly what my hot buttons are, so to speak and where I stand on their spectrum and how I might fit better into different roles.

[00:28:54] Jeffrey Feldberg: So a personality test in this case, the Predictive Index to get to know who you are, what your chemistry is like, what your traits are like, and then being able to match people who are complimentary to that. Am I getting that right?

[00:29:05] Dave Bookbinder: Yeah. It's matching your expected performance based on your own personal characteristics. Exactly.

[00:29:10] Jeffrey Feldberg: Interesting. And you know, Dave, there's that saying out there that you hire on personalities because you can always teach and train on skills. Thoughts about that?

[00:29:19] Dave Bookbinder: Yeah. And I personally subscribe to that. I definitely agree there. Like when we're hiring folks in our evaluation practice, for instance, we can teach them if they haven't grown up in the evaluation practice, we can teach them what they need to know how to value a business. What we can't teach is intellectual curiosity.

What you can't teach is commitment, things like that. Yeah, I agree with you.

[00:29:40] Jeffrey Feldberg: And this isn't what you do day in, day out Dave, but I'll ask the question anyways, just because people and the ROI that people bring to the table is such a big thesis for you that you've written books about. You're a thought leader on and with the podcast. Post-pandemic so much has changed. And in particular, the corporate workplace has changed.

You have people leaving because they're not happy and they want a better life and a better career. You have remote work, you had the great resignation and then the Great Return. And I don't know where we are now.

 As we are here today, and this is likely gonna change by the time this episode airs, but what are you seeing on the talent front if I'm looking to hire? What are some of the trends that I should know about?

[00:30:22] Dave Bookbinder: Well, based on my own personal experience, it's been a very tough market. I've been looking for some qualified candidates and it's tough. We talk about the great resignation and you wonder, where did everybody go? But in terms of where we are now in return to office. I hear a lot about that as I'm talking to business leaders and there seems to be a recurring theme right now, Jeffrey, and that is a hybrid work environment seems to be what's preferred by employees.

Employers might not necessarily prefer that, but they recognize that there's a need for it. And they've seen that their teams have demonstrated that they can be "trusted". To be big boys and girls, if they're not in the office with people, eyeballing them all day long. So what I'm seeing is, when you're not talking about manufacturing where folks have to be in, but when you're talking kind of professional services space, or those professional marketing accounting functions inside of manufacturing firms, it's generally three days a week is what I'm seeing

[00:31:17] Jeffrey Feldberg: So three days a week in the office.

and then okay. The other two days a week out of the office. Okay.

[00:31:23] Dave Bookbinder: Yeah, because look you do need to have some collaborative time face to face. During the pandemic, when we weren't able to get into offices we hired God, several people that were part of our team and, know, didn't meet them for quite some time and onboarding and training and just mind share.

Forget about trying to build a culture, any team remotely, but just getting them trained on up the curb on a remote basis every day was tough. And it would've been nice if we could have gone into an office and just slide your chair back and pull up next to somebody else's computer and say here, let me show you.

[00:31:54] Jeffrey Feldberg: Yeah. That certainly was missed. This show is not meant to be a political vehicle and we don't get into politics by any stretch. So I'm not gonna name the names. People can look them up. They've probably already heard of it, both in the consulting world and also in the financial world, some of the investment banks and some of the banks they've very clearly have said from the top leadership that productivity has gone down from remote work. So don't believe what you're hearing about remote work, being good for the employees and it keeps them happy and it keeps them engaged. Productivity has gone down. America's no longer competitive. We're losing ground to the competition and everyone should be back in the office five days a week, no ifs, ends or butts, so we can get the productivity back up and out there and actually get ahead of everyone else once again. Where are you on that? What do you think.

[00:32:38] Dave Bookbinder: I think there's a couple ways to skin that cat one cynical view might be that wonder how much office space that they have and what their rental expense is. And are they trying to maximize that? The other thing to be fair to some of them when you've got, say a manufacturing company and you've got the folks on the production floor, in the shop, every day.

And then you've got the we'll call them executives or the management team that are not on the floor, not being required to go to work that creates some cultural misalignment in its own. So I don't know that it's necessarily a productivity thing. I generally think that we've all learned that we can work remotely.

And I think we've all done that successfully before it became a necessity. But I think when you've got that, that dichotomy of folks on the floor and marketing team, for example, is not in the office. That creates some internal we'll call them animosities, which could manifest itself in culture, which then would impact productivity.

[00:33:31] Jeffrey Feldberg: So it sounds like there's a lot to this. But Dave, I'm wondering if this was a knowledge workplace only. So there's no manufacturing going on whatsoever. It's all knowledge workers who could be in the office. Don't have to be in the office in that kind of environment. Where are you on what's being said out there, because again, from the consulting firms and from the banks, it's really knowledge work that's being done and there's a choice they can be, or don't have to be in the office.

They're saying absolutely. Get your butts back in the seats and that's just the way it's gonna be no ifs and or, or how that goes with that. Thoughts about that?

[00:34:03] Dave Bookbinder: Look, I start with trust. I trust my teams to do what they're supposed to do. I was a single dad. God, probably at least 12 years or more, and worked for some great leaders who had empathy and I would walk through fire for them. That's one of the underpinnings of my new ROI thesis as well, but. I would do anything for those folks because they recognized what my circumstances were.

They trusted me and I returned that. So that's where I start. I start with the trust and believe that people are gonna do the right thing. But I will say that just recently read another article about folks who are taking side gigs and they're working remotely from home for company A and they're doing contract work for company B, maybe even on company A's time.

[00:34:44] Jeffrey Feldberg: Wow.

[00:34:44] Dave Bookbinder: There's certainly some of that going on for sure.

[00:34:47] Jeffrey Feldberg: It's perhaps easier now to do than it was before. And there's always a few bad apples, so to speak in the cart. But your earlier advice really, it's taking more of a moderate kind of approach of, okay.

Yes, you can have some offsite work, but three days a week, let's have you in the office where we can collaborate, see each other. And in two days you can be doing the remote work. And that seems to at least on, the surface strike a nice balance with what's been going on out there to try to appease everybody.

[00:35:14] Dave Bookbinder: Yeah. And again, if you're doing the right things from an organizational cultural standpoint and you've got people bought in to the mission and it doesn't necessarily even matter where they sit, because they are all gonna be rowing in the same direction and rowing in the right direction.

[00:35:29] Jeffrey Feldberg: Sounds absolutely on point. So, Dave, you're really a multi-talented fellow. Best-selling author, thought leader, podcast host. And you're also at B Riley Advisory Services. So talk to us. What is that all about with the advisory services? What are you all doing?

[00:35:46] Dave Bookbinder: Yeah. So my team is the valuation practice. So we're valuing businesses. We're valuing intangible assets, as well as machinery and equipment in real estate. The firm does a whole lot more. So we've got a holistic line of services for our client companies, basically cradle-to-grave services from venture capital to our investment banking team.

We're raising debt, we're raising equity for companies. We do equity research. We've got an operations management team, Wealth management, and that's just scratching the surface. So basically it's cradle-to-grave services for company. I would say, check out the website brileyfin.com. And I'm sure there's something there that might intrigue you.

[00:36:22] Jeffrey Feldberg: And again, we'll have all that in the show notes. So it'll be literally a point-and-click for all of our listeners to be able to check that out and find that. And before we leave the whole B Riley Advisory Service aside, two quick questions for you. So in terms of being you'd, really, you're not a boutique firm because you're cradle to grave.

As you say, you really have all the services in-house that puts you in a different league. If you will, compared to other firms and investment banks. Can you talk to our listeners about some of the advantages of that? And I'll throw an aspersion right off the bat as you think about that, some people are saying, oh yeah.

Okay, sure. Yeah, there are this huge gigantic firm, but I'm probably paying through the nose for it. That's why they're so big. And they have, these fancy offices and marble floors and granite tops and all those other kinds of things what's really going on as a bigger firm that we should know about?

[00:37:13] Dave Bookbinder: Well, If you've been thinking that valuations are too complicated or too expensive, for example, I'm gonna try and bust that myth for you. And I'd say I would encourage folks to give me a call. I believe in building relationships for the long haul Jeffrey and I work with my clients. I always have taken that holistic view.

I'm really fortunate to be with a firm now that offers these different things, but I'm in a profession where most of the time we're perceived to be a commodity in the same way, accounts and attorneys are perceived to be a commodity. So I've always tried to try and find ways to differentiate by adding value.

And most of the time that adding value was trying to connect the dots around other things that I could offer to my clients. So perhaps helping either in expense reduction, revenue, growth, sales, and marketing, or helping them prepare for an exit for instance. So that's always been my view and working inside a firm that has so many different complimentary components when we across the firm are working with a company and we see an area where there could be a a value add.

It's an easy and seamless way. Just to introduce another colleague who's already got access to the information, no reinventing of wheels. And it's literally a seamless transfer.

[00:38:19] Jeffrey Feldberg: So truly at a one-stop shop where you may start off in one area, but because you're likely covering all the other areas. You can now work. We spoke earlier about having a team that knows each other and works together. Well, It doesn't get any better when they're all in the same firm covering the different practices that they've worked together and their colleagues and their teammates and they're in the same company.

[00:38:38] Dave Bookbinder: Yeah. Just think about it this way. It'll give you a hypothetical scenario. I've only been here a year, but imagine if you will, I'm working with a client company on a valuation matter. I introduce them to my investment banking colleagues to help them raise some capital and then they go down the path of IPO and then we cover them on equity research.

There's a continuum right there.

[00:38:55] Jeffrey Feldberg: Absolutely. And it just makes it so easy and you save so much time and because you are who you are as a firm. There's a reason for that, that you have that track record of success. That you've been doing this for a while, that you then bring that to the table where you may not get that otherwise.

[00:39:10] Dave Bookbinder: Exactly both said, thank you.

[00:39:11] Jeffrey Feldberg: And then lastly, again, just before we leave the valuation side, any other insights or tips, because it's such a hot topic for business owners and Dave, I agree with you when you're thinking of a liquidity event. The valuation today should be the last thing on your mind until you go through the preparation, then you can look at it, but let's now flip it.

We've done the preparation, and we've taken the time, however long it's taken. And we're now ready for the liquidity event. As we're thinking about evaluation, what are your thoughts on that? What kind of insights perhaps we can hear from you that we wouldn't hear otherwise, and no pressure with that, Dave?

None whatsoever.

[00:39:46] Dave Bookbinder: Look, a lot of business owners get their valuation metrics from cocktail parties. They talk to folks that they meet and they hear that yeah. Businesses in your space are trading between five and six times EBITDA. So I'm gonna give you your audience a quick tip on two valuation methods that they need to be aware.

First method is the back of the napkin method. The second is the back of the envelope method. Neither of those are legitimate valuation methodologies. You've gotta do the work. You've gotta do some rigorous analysis around

[00:40:15] Jeffrey Feldberg: Imagine that go figure. And Dave, I would extend what you're saying. When business owners are speaking to other business owners, maybe at an event, or they're seeing each other, who knows where on the golf course? Oh yeah. I just had this liquidity event and I hit it out of the park and I got an X times multiple and X, many millions of dollars and not really realizing that they probably left that much or more in the buyer's pocket.

Didn't even realize it. So be careful with what you hear.

[00:40:42] Dave Bookbinder: Yeah. And also be careful what you hear, because not everybody's gonna admit to something that was less than successful. You may be hearing that they got 15X and it may not be 15X. You may hear that they got making numbers up, obviously, $30 million for their business, but 20 of it could be in the form of an earn-out.

And maybe the hurdles are set pretty high. So there's a lot of risk associated with them achieving that incremental $20 million. So there's always more to the story.

[00:41:08] Jeffrey Feldberg: Absolutely the story behind the story, as we like to say, and that's how we started off this episode. And speaking of the episode, Dave, we're at the point now where we're starting to wrap things up and I have another thought experiment a fun one though. And here it is. I'd like you to think about the movie Back to the Future.

And in the movie, you have that magical DeLorean car that can take you to any point in time. So, Dave, imagine now it's tomorrow morning, you look outside your window, and there it is. The DeLorean car is not only there, but the door is open, waiting for you to hop on in. So you go on in and you can now go to any point in your life, Dave, as a young child or a teenager, whatever point in time it would be.

What are you telling your younger self in terms of, Hey, Dave, here's some life wisdom or some lessons or do this, but don't do that. What does that sound like?

[00:41:58] Dave Bookbinder: That's a fascinating question. And I'm sure that if I spent some deep thought thinking about it, I'd have a different answer, but I'm gonna give you the visceral response. And that is I'd punched the Delorean in back to around the.com boom.

And I remember having conversations with CFOs at the time while I was in evaluation consulting and they were handing me forecasts, literally hockey stick forecasts, where they're gonna be the greatest thing since can be our end slice bread. But they're never gonna make a nickel and putting them through the rigorous process that we would do.

They would literally tell me, you don't get it. It's all about eyeballs. And my valuation should be increasing for every dollar that I'm losing. So I would go back in time to that spot. I would pull those CFOs up and I'd say told you so.

[00:42:46] Jeffrey Feldberg: Isn't that the truth? And, with that wisdom that's really, there's a lot to unpack there, Dave, with that, because whether it was a dot bomb era as I call it back in the day or you've had so many other fads and trends, and I'll just call them the digital tulip of the time where people get caught on this bandwagon, which really is not sustainable, but everyone's going with it, hey stop. Does it make sense? Does it go back to basics? And if it doesn't. Think twice before you go in that direction and Dave, to your point, we can swap stories here. I remember with my e-learning company, which had real customers, it was profitable. And I remember to this day, I was at a trade show and there's new competitors on the scene and all ventures packed money and everything else.

And he pulls me aside and says, Jeffrey, your company, Embanet, you're a dinosaur. You're not gonna survive. Companies like me were giving it away for free Dave, to your point, we're giving it away for free. You're not gonna possibly survive. Well, looking back, we know the Epilog on that one and Embanet went on to a nine-figure deal.

That company never saw the light of day. And that was that, but it goes to the point of just be careful who you're listening to, who you're surrounding yourself with, and what you're doing, particularly when it comes to trends so.

[00:43:55] Dave Bookbinder: Yeah. Fundamentals matter. Remember the old sock puppet?

[00:43:59] Jeffrey Feldberg: yeah.

[00:43:59] Dave Bookbinder: Yeah, the mascot for thing, it was pets.com. It turns out that, there, you can have a good viable business model by selling pet supplies online. You just have to do it profitably.

[00:44:09] Jeffrey Feldberg: Exactly. Exactly. And the key words is profit. Although there may be one exception to that. I remember Jeff Bezos from Amazon back in the early days, he was on a talk show and they said, how do you spell profit? And he said P R O P H E T. And they were one of the few companies that weren't profitable.

They did get around to profitability. There are always exceptions, but yes profits do matter. The real profits, P R O F I T in case you're wondering that does matter. And that really does make a difference.

[00:44:36] Dave Bookbinder: Yeah, eventually it does. We work with a lot of early-stage tech companies and life sciences companies, and they can be demonstrated to be unprofitable for years as they're going through, for example, drug development. But at some point, you've gotta demonstrate some kind of profitability to warrant evaluation when you're not profitable and you have evaluation that's higher than what the numbers might suggest if you will.

It's because of that narrative. And there's an expectation in the future that there's going to be some positive return and investors willing to pay for that.

[00:45:06] Jeffrey Feldberg: Absolutely. And that goes back right up your alley, Dave, back to valuation, but having a, really a narrative that's backed with data with facts that this is not a dream somewhere. This is actually having the foundation to be a dream. That's realized

[00:45:20] Dave Bookbinder: Yeah, but can you imagine today, somebody handing you a forecast and telling you I'm never gonna be profitable and I should be worth more as a result of that?

[00:45:27] Jeffrey Feldberg: Unfortunately, it just goes on throughout history. We just repeat ourselves and this is going way back and I may be off on the name, but it was one of the Titans of business back in the day. It may have even been Rockefeller. Who said it was time to sell this before the market crash?

And again, this may politically incorrect today to say, but I didn't say it. I'm just paraphrasing what was said back in the day. He says, when the shoe shine boy starts telling you about what stocks to buy, that's when you know, it's time to get out. And there's a lot to be said to that when everyone's talking about it, everyone's doing it.

It's not what their main say is to be worried. Be very worried.

[00:46:04] Dave Bookbinder: Now it's Reddit.

[00:46:04] Jeffrey Feldberg: Exactly. That could be a whole other episode that you and I could just riff off of each other on and have a lot of fun with.

[00:46:10] Dave Bookbinder: For sure.

[00:46:11] Jeffrey Feldberg: But on that note, we're gonna wrap up this episode, Dave, thank you so much for taking part of your day and spending with us on the Deep Wealth Podcast and as always, please stay healthy and safe.

[00:46:21] Dave Bookbinder: It's been my pleasure. Thanks so much for having me.

[00:46:23] Sharon S.: The Deep Wealth Experience was definitely a game-changer for me.

[00:46:26] Lyn M.: This course is one of the best investments you will ever make because you will get an ROI of a hundred times that. Anybody who doesn't go through it will lose millions.

[00:46:36] Kam H.: If you don't have time for this program, you'll never have time for a successful liquidity

[00:46:41] Sharon S.: It was the best value of any business course I've ever taken. The money was very well spent.

[00:46:47] Lyn M.: Compared to when we first began, today I feel better prepared, but in some respects, may be less prepared, not because of the course, but because the course brought to light so many things that I thought we were on top of that we need to fix.

[00:47:03] Kam H.: I 100% believe there's never a great time for a business owner to allocate extra hours into his or her week or day. So it's an investment that will yield results today. I thought I will reap the benefit of this program in three to five years down the road. But as soon as I stepped forward into the program, my mind changed immediately.

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[00:47:35] Lyn M.: The Deep Wealth Experience compared to other programs is the top. What we learned is very practical. Sometimes you learn stuff that it's great to learn, but you never use it. The stuff we learned from Deep Wealth Experience, I believe it's going to benefit us a boatload.

[00:47:49] Kam H.: I've done an executive MBA. I've worked for billion-dollar companies before. I've worked for smaller companies before I started my business. I've been running my business successfully now for getting close to a decade. We're on a growth trajectory. Reflecting back on the Deep Wealth, I knew less than 10% what I know now, maybe close to 1% even.

[00:48:07] Sharon S.: Hands down the best program in which I've ever participated. And we've done a lot of different things over the years. We've been in other mastermind groups, gone to many seminars, workshops, conferences, retreats, read books. This was so different. I haven't had an experience that's anything close to this in all the years that we've been at this.

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[00:48:34] Kam H.: I would highly recommend it to any super busy business owner out there.

Deep Wealth is an accurate name for it. This program leads to deeper wealth and happier wealth, not just deeper wealth. I don't think there's a dollar value that could be associated with such an experience and knowledge that could be applied today and forever.

[00:48:52] Jeffrey Feldberg: Are you leaving millions on the table?

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