Tom DuFore: 0:01

Welcome to the Multiply Your Success podcast, where each week we help growth-minded entrepreneurs and franchise leaders take the next step in their expansion journey. I'm your host, Tom Dufour, CEO of Big Sky Franchise Team. And as we open today, I'm wondering if you have a contingency in place for that just-in-case situation, or have you thought about selling your business one day? Well, our guest today is Alan Franks, who shares with us some best practices on how to be prepared to maximize the price of your business. Now, Alan is a fee-based, certified financial planner and author of Empowered Money. He provides holistic financial planning services nationwide and takes a client-centered approach, helping individuals and families to find their lifestyle goals and then reverse engineering a tailored financial plan to achieve them. His focus on cost-effective, tax-advantaged strategies empowers clients to realize their dreams as quickly and efficiently as possible. Alan has a book and podcast, both called Empowered Money. You're going to love this interview, so let's go ahead and jump right into it. Fantastic. Well, and this idea of empowered money is part of the reason I wanted to have you on the show to talk. One thing that stood out to me in preparation for this is when you talked about the biggest mistakes you see owners make when it comes to the way in which they view their business. So I'd love just to start there. So what is this mistake that so many owners are making about how they view their own business?

Alan Franks: 1:46

Yes. And we are seeing it right now, particularly, you know, with the older generation, baby boomer generation, a lot of people started these businesses almost as a lifestyle business, is what we would call it. Hey, I don't want to be told when to go to work and where to go to work and what to do. So I want to go start a business where I'm in control and I can work as much or as little as I want on what I want and where I want. And what they end up forgetting about is that this business that they started is an asset. Much like their home is an asset, much like their stocks are an asset, this business is an asset. And they forget about that. And what they end up doing is they they don't track the value of that asset, right? And that's the hard part about being a business owner is hey, if you want to go see what your stocks are doing, it's in real time down to the second, exactly the value that's in your 401k right there. If you want to go see what your whole value is, you can go on a Zillow and get a pretty good estimate on there, right? But if you were to ask somebody, what is the value of their business? Oh my goodness, they're not gonna know because they're not tracking it. And the thing about tracking is that it's effective. And if we can start getting business owners to understand the value of their business, understand we could grow the value of the business and start tracking it over time, I think that we would have start to have a lot better performance. Because the truth is, see, SP 500 has really outperformed a most of the small businesses in this country, right? Why do I think that is? Well, they do have some of the smartest people in the world running those businesses. They got a lot of capital, but also they are tracking constantly the value of the company and they're and they're striving to drive that value up.

Tom DuFore: 3:22

Well, that's a really great point you make. So how is it then that small business owners or founders or even mid-sized companies that are out there? How do you start getting this accurate valuation? And this always becomes a murky point that I run into with founders, owners, people looking to sell their business, or even in what the world we do, working with them to help franchise their business. So I'd love for you to talk about that.

Alan Franks: 3:48

Yeah, I would say starting out, that accuracy may not be as important as we might think. More than more important than accuracy would be just keeping a consistent methodology there. The truth is, if you go to my website, the businessplanninginstitute.com, we actually have a free valuation software right there. And it's pretty darn good. Now, the truth is, Tom, is that the only way to really find the value of your business is to take it to market, kind of like a free agent in the Major League Baseball program. Only way to find out what you're really worth is to go out there and have multiple people bet on you. Well, that takes a lot of time and a lot of effort, and you don't want to do that unless you really want to sell there. So as long as we can stick with one or two, and sometimes we'll even do three different valuation softwares that are looking at different things and kind of average them out. But as long as we consistently stick with the same softwares here, we can plug this in right after you get your tax return done every single year, and we can really track the value of that business every single year.

Tom DuFore: 4:51

I think it's interesting. So we track this number, we get it, but what do we do with it? I'm not planning to sell my business anytime soon. Maybe it is a lifestyle, or I'm just growing the business, I'm opening more locations.

Alan Franks: 5:03

Why does it even matter? Well, here's why it matters a couple of reasons. Number one, whenever we do evaluation, we give people two numbers. Number one is the number that it's worth that we think it's worth right now. Okay. And the second one is what we think it can be worth if they go in and they get their systems and operating procedures in line, if they get their legal documents in order, if they get their accounting fixed up, if they work on their marketing a little bit. And so what's really cool is okay, we're gonna give you two numbers. Let's say that, hey, your business right now is worth two, but it could be worth three, right? If we get all this stuff. Well, what's great is okay, all the difference is between two to three is you running a better business, right? So exit planning is got a bad rap here because people are, I don't want to exit, I want to grow. No, all exit planning is is just running a better business with a deadline. That's all it is, right? So it could be, hey, you want to exit in 10 years. Great. Well, what do we need to do today to run a better business to make that possible? Now, here's what's really cool about it. Okay, if we can get all of your operations to where we close that value gap from 2 million to 3 million, that means you're running a better business. And what that's gonna end up doing is eventually driving up the revenue, increasing the profit, which is then going to increase the multiple that you can get. So it works in this cyclical pattern here that, hey, if we can just run a better business, you know, we're always focused on more and more and more and growth and growth and growth. And sometimes we forget to take a step back and say, let's focus in on better, better, better. But if we could take some time focusing on better systems here, better processes, better legal, better finances, then all of a sudden that inevitably is going to grow our revenue and our profit as well.

Tom DuFore: 6:41

For someone who gets that number, they start thinking about it. Now you're tracking it. Even an annual number, it gives you something to track and measure and compare each year to even if it's once a year. So I think that's significant. So for someone that goes through this, I'd love maybe even a use case or an example of someone you've worked with or something you've you've seen where somebody kind of tracked this and they saw some results, or maybe they exited the business, or because I think of owners I've worked over the last 20-some years where a founder unexpectedly has to leave the business, or one customer I worked with, unfortunately, he had an untimely death. He had a heart attack unexpectedly out of the blue, and it was a father-son business, and all of a sudden this happens. So I'd love for you just to maybe talk through that.

Alan Franks: 7:34

The most important question we can ask any business owner is if you did not wake up this morning, what happens? Okay. If you did not wake up this morning, what happens to your business? Right. Now we talked about what do we do with that business valuation. Well, the number one thing that we want to do is tie it to your personal financial plan and make certain that it's part of an overall financial plan. But the second thing we want to do is we want to make certain that we've got a really good buy-sell agreement in line with the valuation in mind there. So obviously, if it's a partnership, let's call it 50-50, that's very easy to put together a buy-sell agreement right there, typically funded by some sort of insurance there to bring to the table. But let's say there isn't a partner. Let's say you're the sole owner. Still the same thing applies. Does your spouse really want to go in and run this company? Do we really want to have people have to buy out a spouse right there? So even when we only have one person, we like to have a one-way-by-sell agreement that has the exact plans of who is going to take over if something happens. The truth is, we need to have this for every single person on your team. Hey, so-and-so goes out of maternity leave. Who's filling in? Hey, so-and-so comes down with uh, you know, stage four cancer. Who's filling in right there? Hey, what happens if you don't wake up? Who's filling in there, right? So, one of the things we could do with this valuation is not only create a really strong financial plan for you, but also have a good contingency plan if you don't wake up one morning and make certain that your spouse is going to be able or your family is going to be able to get the value out of the business and it's not just going to shut down there. So, a couple of use cases here. Okay. Number one is that we are dealing with a business right now that we're helping, we're helping sell. But what happened is that the owner, you know, died. And I would I wouldn't even say unexpectedly. I mean, they're in your 70s. Like, how unexpected is it when we get all right, if if you're above 60 right now, I wouldn't even say 55. Like, we really need to have a good game plan of what could happen, right? Because once you get to 70, I wouldn't call it unexpected anymore, right? But what happened was is that all of a sudden his wife and his son own 50-50 of the business. Well, guess what? His wife's also 70. She wants to retire. So now we have had to go out and try to help his son get a really massive SBA loan, right? This would have been things that could have been prevented if people knew the value of the business ahead of time and had the right legal documents and place here on this. So that's one case right there. Another case where this really did help out is we had a roofing client, and he'd been in roofing for three years, and it was just tired of it. He was a young guy, built a great company, really profitable. They said, hey, we want to sell. And so we did a valuation, and the valuation came back, and it was worth about six million dollars, right? All of a sudden, these business brokers start coming along and they're like, oh, we can get you 10. We can get you $10 million, right? Well, sure as heck, as you know it, we take it to market, we get him ready, we really help him exit the business prior to taking to market, so it's less dependent on him. And sure as heck, we ended up getting about $7 million. So the valuation was actually much closer to the reality than what the business brokers were promising him. But that's after a full year of us working with him to get out of the business, to get better systems and processes, and closing that value gap to get the most money when he sells. But most people listening here are not looking to sell, but they still need to be prepared to exit, either from a health right, might even be you know, personal issues, heck, it might even be transitioning down to the next generation. We don't want to leave him with a hot mess here. We want to leave them with a nice little gift with a bow wrapped on top.

Tom DuFore: 11:13

For the founder-led enterprise or even for the franchise or this has been great information, but we work with clients, help them franchise their business, and then eventually they have franchisees. And now the franchise or is working with franchisees. So, what advice might you give to a franchiseor on how to help their franchisees be prepared for this type of an event or their own valuation?

Alan Franks: 11:39

That's right. Well, what's interesting is my wife's actually an internal accountant at Focus Brands now, Go-To Foods. And we were go, we were at a uh Barbaritos restaurant, and we go in there and it was clear that there was some inconsistencies. Things weren't working, things weren't clicking. And my wife just instantly said this place needs a little bit of a corporate influence to it, right? And so the truth is that very, very, very few people in this world are actually good business owners, right? Very few people, right? So having a franchise there that's helping you give the direction that you need, the systems that you need, the technology that you need. Frankly, sometimes the accountability that we all need, right, can really help improve not only the success rate of your business, but also the profit of this business. But what I would tell a franchise or here is to say, hey, you know what? We want to make our, we want to get our franchisees thinking about the value of their overall enterprise and how adding locations increases the overall value. And I know when I'm working with companies, we're trying to get past this magical number of a million dollars of EBADOF, why million dollars of EBITOF, hopefully about $10 million of overall revenue and run around a million dollars of EBITDA, all of a sudden we're attracting a bigger investor at that point in time. All of a sudden, we're gonna catch some eyes of some private equity owners at that time. And when that happens, when we go from the small mom and pop shop where people are basically buying a job here, which is not what we don't want to do, to hey, we are scaling, we are adding, we have multiple ventures here, we're getting our revenue up, we're getting our profit up. That's what real investors want to buy. Nobody wants to buy a job. They want to buy an asset here, right? So when we can get them above that threshold there, all of a sudden their multiples are gonna be higher, and they and the types of offers that they're gonna be getting are just so much more attractive.

Tom DuFore: 13:37

What's the best way for someone to find out about what you're doing, get a copy of your book, connect with you? Yeah, absolutely.

Alan Franks: 13:42

So, uh, okay, and I hate to give you two websites, but I've got my book, Empowered Money. I'm not gonna give you that website there. You just go on to Amazon and buy that. Yeah, you know, if you search it, you'll find it, you'll find my podcast on there. It's called Empowered Money as well. To get a free valuation on your business, go to the businessplanninginstitute.com. Super long name, I know, but it's just exactly as it's built. Uh sound the businessplanninginstitute.com. There you can check us out, you can check our offerings, you can do the um questionnaire that and we'll get you that free valuation there. And that would be the best way to reach out to us.

Tom DuFore: 14:17

Perfect. Well, we'll make sure to include in the show notes here the links to the website, your book, to your podcast, and get all of that on there so someone who's listening in can have quick and easy direct access to it. So, Alan, this is a great time in the show, and we make a transition and we ask every guest the same four questions before they go. And the first question is have you had a miss or two on your journey and something you learned from it?

Alan Franks: 14:39

I've been very lucky and I'm very grateful. My dad actually gave me a really good financial education right off the bat. He was a business owner. He brought me in on meetings that he was at. He, you know, I got to see him by real estate at a young age, struggle as a business owner at a young age, right? But I would say the one thing that he did not do is he did not instill trust in the capital markets in me. Like if, you know, business owners, they really like their land, they really like their real estate, they really like their business. Things that they can touch and grasp, right? And so, you know, now that I'm a financial advisor, certified financial planner here, I see, oh my gosh, these capital markets really do work. My capital markets, I mean, just you know, like the SP 500, right? So one of the biggest misses I would say is that I, you know, started working in 2010, and I sure as heck wish I would have put a lot more money away. I invested a lot in my business, and my business has done great, don't get me wrong, but I really wish I would have reinvested some in some of the businesses that have the best, smartest minds in the world, because man, the growth since 2010 has been amazing on that. And I think uh, you know, and I'm still you know bullish on the American economy going forward. So that's the one thing I would say is hey, it's taken me a it took me longer than most to gain trust in the investment market. That being said, you know, I'm so grateful that I had a head start on the business world and on the real estate world.

Tom DuFore: 15:58

Thank you for sharing. And let's talk about a make or a highlight, a win or two.

Alan Franks: 16:02

I I tell you what, working with business owners has been such a game changer for me. So kind of going back to my career, I started off actually in Macon, Georgia, and there really wasn't many W-2 jobs in Macon. And so I had to go call on the business owners, and it was the grimy business owners. It was the old changers, the tire changers, right? They were making good money. And I really loved that personality. Flash forward, I get married, I moved to Atlanta, and all of a sudden, uh, this is the biggest city I've ever been in. The name of the company is not on the side of the building. You know, I'm looking here at skyscrapers that have more businesses and Macon, Georgia probably had, you know, one building than the entire city. But the sign isn't there. So I started working with a lot of executives and W-2s. And then I, you know, had this change of saying, you know what, let's get back in. The most impact we can make is working with business owners. So the biggest win, I would say, is just transitioning back. And the truth is, is that my personal business got so big that I was having trouble running it. And I said, you know what? I've got to learn to become a better business owner for my own business. And as I'm learning and reading these books and going to seminars and applying this stuff to my business, why don't we start helping other business owners do the same? So that's been probably the biggest win is saying, hey, you know what? I've got to get better as a business owner. Let's get some other people along the road with us. I like that perspective.

Tom DuFore: 17:27

I love that. Well, let's talk about a multiplier. The name of the show is multiply your success. Have you used a multiplier to multiply yourself personally, professionally, or any of the businesses you've run?

Alan Franks: 17:37

Yeah, I want to just give two books out here that have been really big for me here over the last year. One's Buy Back Your Time. Yeah, I would say I would put it in the category of who, not how. And it's basically, you know, what's it how to hire people and how to grow your business. And that's been a really big success. Even just from having my assistant check my email has really saved me two hours a day and a lot of a headache and a lot of time. And yes, every now and then something does slip through the cracks. But the truth is that I was really bad at email. I spent two hours a day on it. Things were getting missed anyways, right? So having somebody who's checking my email is really giving me back a lot of time and allowed me to think again, right? So that is one book right there. And then the other book would just be the AI-driven leader. I don't know if you can get by that in print yet. I think it's just audible. But I mean, obviously, if we're not using AI in our business, you know, I'm not going to say we're going to fall behind, but I think we're missing out on the scalability of this. And frankly, it's really cheap. I paid $20 for Chat GPT, and it's been a great we're training it right now to basically be an assistant for us, right? And so AI is not perfect. It has hit up, in my opinion, a little bit of a ceiling right now on the use factor in a business, but it's still, there's a lot of good right there. And I think it is going to be a multiplier that's going to allow us and our staff to really scale our time moving forward. The final question we'd like to ask every guest is what does success mean to you? Man, you know, I this is going to sound crazy unless success. I hate to say this, this is so vain, but success means looking in the mirror and just being happy with who you are, right? And there's so many times, and complacency will never accomplish that, right? Comfort will never accomplish that. And it's this constant challenge of, okay, if you're a high achiever, you know what it feels like to look in the mirror and not be happy with who you're looking at, right? And so it's almost like every single day I strive. I get this sounds crazy, right? I get up and I strive to be happy with the person that's in the mirror that I'm looking back at and saying, hey, did I do what I said I was going to do? Right. Which as a high achiever is a lot of things, right? You know, and so it is, and it's, you know, emotional, it's spiritual, it's physical with workouts, and it's professional, financially as well, right? And so we hold ourselves to this really high esteem there. So, what does success be for me? It's gonna sound crazy, but you know, just getting to the word boys, life's better when your confidence is high. And the only way to get confident is by taking action, right? And so that's the biggest challenge that I have is I love to create, I love to think, uh, you know, I love to attract here, but also at the end of the day, you got to take action, right? So that's my biggest my it's not a house, it's not a new car, it's not, you know, but there is a sense of getting the business working on all cylinders and really striving. Of course, that builds the confidence, right? The end of the day is just being happy with who you are.

Tom DuFore: 20:33

As we bring this to a close, is there anything you were hoping to share or get across that you haven't had a chance to yet? Yeah.

Alan Franks: 20:40

All right, so let's talk about the freedom framework for a second. Okay, so the freedom framework is more or less the process that we take our clients through. And the reason we created the freedom framework is that people go from entrepreneur to on-trappreneur, where they are trapped in their business, right? To untrapped preneur, right? And there is there's this, there's this cycle, this phase that people go through. And what we find is that there are a lot of broke entrepreneurs in this world. And when we say broke, we don't necessarily mean financially. It could be emotionally, spiritually, physically, energy-wise, right? We find that people get out, we've heard the adage, we give up a 40-hour job to get an 80-hour job, right? And so what we find is I want you to think of a Venn diagram here of three circles, okay? And on top, the first circle is you personally, okay? How you are personally, emotionally, spiritually, all that thing. And then you have your financials right here, your personal finances, and then you have your business. Now, where all three of these overlap, that's life. And that's where our business owners live, and that's where we choose to operate, is right there. Because the truth is, is that if your leadership is limited, it will limit the growth of your business over time. Okay. If the growth of your business is limited, it will limit how much you're able to accomplish financially over time. If your finances are struggling, it will limit how much you can borrow to go grow your business, right? So the truth is that all three of these circles, you personally, financially, and professionally here, there are you're going to hit ceilings of complexity here in each one, where you need help getting past them. You need help getting your finances in better shape. You need help becoming a better leader. You need help solving this business problem right there, right? And so what we find is that we are trapped here by these ceilings of complexity in each one. And that's really what we're here to try to help is try to get you from an on-trapped preneur to an untrapped preneur right here, so that you can really, you know, uh live the life that you really want to live.

Tom DuFore: 22:51

Alan, thank you so much for a fantastic interview. And let's go ahead and jump into today's three key takeaways. So, takeaway number one is when he talks about mistakes in which owners and how owners view their business. And he said a lot of times founders started their business as a lifestyle, but that they forget that their business is also part of their net worth. And that tracking an estimated value of your business is important consideration. And it also, in my opinion, then helps you start thinking about your business as not just cash flow or lifestyle, but also as an asset. Takeaway number two is when he gave a quick description or summary of what exit planning is. And I loved his definition of it. And he said, exit planning is running a better business with a deadline. I thought that was great. Takeaway number three is when he asked, if you don't wake up this morning, what happens to your business? Or what do the people left with your business, what do they do with it? And so he gave a couple simple suggestions put together buy-sell agreements with your partner, or make sure there's a one-way buy-sell agreement for your business to sell if you were to unexpectedly pass on, or have a contingency plan, which might be more likely and in greater need to have a contingency plan for your business, regardless of what might happen, and regardless of your age. Is for example, maybe an employee goes on maternity leave, or someone gets sick for an extended period of time, or they need to take care of an aging parent. And now it's time for today's win-win. So today's win-win is having a business valuation and contingency plan helps you run a better business and be prepared for a worst case scenario and allows you then to also exit the business when you are ready to exit. I know, in my experience of working with founders and entrepreneurs and successful leaders for many years now. Oftentimes, many of them reach a point where they're ready to exit and sell their business, but the business isn't ready for it. So I think that this is just good practice. It helps you as the founder or the leader of your company to have a plan. It helps your staff to have a plan. And so that's the episode today, folks. Please make sure you subscribe to the podcast and give us a review. And remember, if you or anyone you know might be ready to take their business to the next level or franchise their company, please connect with us at bigskyfranchisee.com where you can schedule your free, no obligation consultation to get the process started. Thanks for tuning in, and we look forward to having you back next week.