1839 – Unlocking Corporate Value with Ken Sanginario

Josh (00:00:05) - Hey, thoughtful listener, before we get going. Did you know that my company up my influence? Com has launched more than 200 business podcasts. The host of our shows are amazing leaders and collaborators. Folks I want to connect you with. Maybe you deserve your moment in the spotlight as a guest of one of these amazing shows. Just go to up my influence. Com where you can see more than 50 shows that are actively seeking business leader guests like you to celebrate right now in front of their high caliber audiences. Just click on the podcast tab and up my influence. Com where you'll see shows like the Optics in Action podcast hosted by the visionary Ryan Weiss, president of EPS. This daily podcast is a treasure trove of insights for anyone in the manufacturing and construction world. Are you a business leader or innovator in these industries? Then Optics in Action is your go to source for stories that inspire and strategies that really work. Ryan and his guests dive deep into the journeys of successful founders, uncovering the secrets to scaling up in today's fast paced business environment.

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Ken (00:02:29) - Thanks, Josh. Glad to be here.

Josh (00:02:31) - Well, there are a lot of ways that we can think of what is value.

Josh (00:02:36) - And then of course, we pair that with corporate value. Well, what are we talking about?

Ken (00:02:41) - We're talking about prime primarily private companies, private business enterprises primarily in the US, lower middle market, typically 5 million to 100 million in revenue, which makes up a big piece of the US economy. And,.. I'll give you a couple statistics. I mean, roughly 70% of all of those companies in the US are baby boomer owned, and they'll have to transfer ownership of their companies whether they like it or not, sometime over the next ten years. And most of those companies are not prepared for that eventuality., the statistics are not in their favor. Roughly about 85 to 90% of companies that try to go to market and transfer ownership, whether they're selling to their management teams, to the next generation, to, you know, outside strategic or private equity firms, whatever the case may be, about 85 to 90% of those companies are not sellable. And so,, the companies that do transact, which is only about maybe 10 or 12% in total,, half of those transact by granting concessions, major concessions at the negotiating table, and only a small fraction, about 6% of all the companies that go to market actually transfer ownership on timing in terms that are appealing to them, that they desired at the outset of the process.

Ken (00:04:11) - So the whole concept of value growth is designed to help those private companies first become aware and then become capable of increasing the the quality and the value of their businesses. So when that eventuality,, comes and they need to transfer ownership, they will be ready for it and they'll be able to transact at a much higher value with a much higher rate of success. So that's kind of what value growth is all about. It's a huge market need in the US economy, especially around the world as well. But we focus on the US economy and, and not many people understand it or how to how to fill that need. So that's what we're all about.

Josh (00:04:57) - Yeah. You know, I wonder I mean, you know, I just think about everything that we put our blood, sweat and tears especially. We're talking to owners right now. Founders, how much effort we put in, particularly in the early days. And, you know, without the proper, you know, just a little bit of extra diligence during the process and throughout the process.

Josh (00:05:20) - And certainly as we get to different stages of business., what a,, what a huge missed opportunity. If we're not kind of focused on look, it might be out of, you know, out of our, you know, earshot or whatever to, you know, kind of think about, you know, what life is going to be like ten, 15 years from now if that's the case., and we're, you know, solving a media problems and we think that that we're doing the right thing. But, Ken, it's it's more than that. Can we maybe think about,, some of those things that in a perfect world, a founder would be doing right from early stage so that they can kind of keep this focus on exit, transition, legacy, you know, kind of the next phase or generation that that outlives the founder, you know, at their level of involvement because it can look a lot of different ways.

Ken (00:06:12) - Yeah, absolutely., great question. And I'll tell you, one of the major, major mistakes that business owners make all the time, I've seen it over and over for the last 30 years.

Ken (00:06:23) - Plus is they treat they they believe and they treat revenue growth and profitability as direct drivers of value for their companies. They think, if I just keep growing the top line and I just keep being as profitable as I can, I'm naturally increasing the value of my company and the appeal to an eventual buyer. And that is a big fallacy. And I spent 18 years turning around distressed companies. Josh, typically as interim CEO turnaround CEO for 6 to 18 months at a time in any given client full time deep dives., and I learned in those years that many of the companies that were in distress, that were turnaround clients of of ours, they got there by growing too fast. They were growing revenue. They were focused on growth, growth, growth. They didn't understand how to build the infrastructure around that growth, to support it, to make a sustainable company. And eventually they had they had weak points that eventually became fail points. And that caused the company to slip into distress. And if they catch it early enough and they ask for help early enough, they can turn it around and fix it.

Ken (00:07:39) - Many in many cases, they wait too long and it's too late and they they end up failing. So,. Where the real revenue drivers, the real value drivers are, is in all of the underlying qualitative attributes that are spread throughout the whole company. Revenue and profitability are byproducts. They're not direct drivers. And so if they focus on all of the qualitative attributes around the company, across the whole enterprise, in a balanced, methodical manner, and they increase the quality, they're reducing risk. At the same time, revenue and profitability will be the byproducts of that, and that will naturally increase the value of the company if they're just growing revenue and profitability. Without all of that other work involved, they're actually increasing the risk of the business and eroding value. Not always, but in many cases. So.

Josh (00:08:39) - Wow., right there was,, to our friends that listening right now, if if you were just casually listening to what Ken just said right there. Go back. Go back and rewind and listen to that,, that revenue and profit is the byproduct.

Josh (00:08:53) - , but, Ken, let me ask you something. I hope you don't mind., you know, just about pricing, because this is something that that we've been contemplating., so just internally, you know, we've had a price point and on a product, and yet our scope has kind of increased,, gradually over the past couple of years to the point where it really like the, the, the profit margin on a particular price. And I'm sure that there are other people like they encounter this, like, you know, how do we know or do you advise on when there is maybe a shift in pricing that might need to take place?

Ken (00:09:32) - You know, Josh, it all starts with a really well developed, comprehensive strategic plan. And I don't know. I almost know I can't even remember ever visiting a company in the last 30 years that actually had one in place that that I thought was credible and well developed and articulated, and everybody in the company understood it and so forth. But there is a process.

Ken (00:09:58) - There's a framework that any company can follow. We teach about it., we teach it in our we have a certification training and certification program for advisors and business owners where we teach some of that,, those concepts in the framework. But there's a process that companies can go through to develop,, to to get a clear understanding of the current state, qualitative and financial state of the company. And then the strategic planning process helps them to create a really clear future vision, future state of the company. And then you craft an implementation plan to go from here to there that usually takes several years, 3 to 5 years to achieve. But in that process,, pricing, product mix, customer mix, target audience, target customers, market expansion, innovation, all of those concepts are all covered,, because it's really critical for the company, for companies to remain very focused on where they're trying to go and why and how they're going to get there. And most companies end up, I'll call it scope creep.

Ken (00:11:10) - They have products and services that start off as focused, but then in response to customer requests, they start moving a little outside in this direction, a little outside of that direction. They change their pricing to accommodate this segment or that segment, and they end up serving all kinds of customers in all kinds of different ways. And they lose their they lose their focus. Their pricing gets becomes,, ineffective, their margins start to shrink. And they and they're in this sort of cycle that's hard to get out of because now they've created an expectation from their customers about what the pricing is. And customers don't like things to change. And, you know, it's just so it really all starts with a strategic planning process that helps the company create a very focused vision of what they want, what they want to be when they grow up and say, 3 to 5 years, look out. What do they want the company to look like?

Josh (00:12:13) - There's so much I wish we had more time to go down the rabbit hole on that.

Josh (00:12:17) - Ha ha. It like scratching the surface, like. Ooh, that deserves a deeper conversation., which folks,, can have., so your website is corporate value net., you have resources on the site, and certainly,, but I'm hoping maybe you can kind of explain where,, corporate value metrics comes in, like how you work with your clients. Like, what does that maybe initial engagement look like?, I don't know if you want to touch on,, you know, kind of your software platform that you use as well.

Ken (00:12:52) - , sure. So our mission is to enhance the value of private companies, and we do that three ways. We have an education program where it's a very rigorous certification and training program. We train advisors from all different professional disciplines who want to learn about the whole rest of the of a, of a business enterprise, all of the functional areas that are outside of their expertise, so they can have more holistic conversations with their clients. So we have the educational component, and we do a lot of other education as well speaking, writing, webinars, seminars a whole bit.

Ken (00:13:33) - , we have a software platform that is a I it is the most sophisticated and versatile value, growth or value creation software really ever introduced to the advisory world. It's drawn a claim from,, advisors from all around the globe. And,, that's called the Value Opportunity Profile. It's a SaaS product and we license it. We train and teach how to use it, and it all goes hand in glove with all the concepts in our educational program as well. We also provide direct advisory services and training services to business owners and their leadership teams, as well as to advisors advisors in their firms that they run. So three segments education, Software and Tools, and Direct Advisory services.

Josh (00:14:26) - Now your website can is corporate value. Net for someone that's been listening. I'm just quite specifically like what would you recommend they do from here? If they're maybe they're doing some research on you? This podcast came up and now they're listening to the episode,, and, what's the next step here? Yeah.

Ken (00:14:44) - I mean, if they like, if they're interested in this whole field and they'd like to learn more if they visit the website, there are a variety of kind of, you know, call to action buttons where they can request more information, request a call, request a demo of the software, whatever they like.

Ken (00:15:00) - And any one of those will come to us and we'll we'll be able to set up a call or a zoom meeting or whatever, whatever they'd like, and they can learn more. We're, we're we're a very,, low pressure organization. We don't we're not we're not,, we're not a sales pressure kind of organization. So we want to educate people first. And if they have an interest for a for a deeper knowledge and they like to get involved in this area, then we'd love to bring them into our community. That's which is actually the part of our whole offering is we have a value growth community, a very robust,, portal where advisors and owners,, practitioners can join us, join the community, get access to tools and training and webinars and mentorship programs and all kinds of resources that we have and offer, and as well as,, connecting and,, networking with all of the other members in the community. So that's the other way that they can get involved is just join the community and learn more and then,, go at their own pace.

Josh (00:16:06) - Yeah. Ken Centenario again, you are a value creator., also, you're a podcast host. You mind sharing a bit about your podcast?

Ken (00:16:16) - , sure. We,, we're just we just launched our podcast called the Value Growth Podcast. It's going to be all about the all of the those underlying qualitative attributes in companies and where the real lovers are to that need to be pulled and pushed to create value in a private company. We're going to be interviewing business owners and advisors, people who have who have created a lot of value in their organizations or for their clients,, by following the principles of value growth in one area or another, or maybe maybe holistically for the entire enterprise. But we want to we want to,,, interview people who have made a big difference for their organizations or for their for their clients., not by strictly chasing revenue or slashing costs to get more profitability, but by doing it the right way. And we want to hear their stories and share their stories in an educational way so people can really learn,, what it means to create value in a company and increase the quality, reduce the risk and make the company more sustainable in the long term basis.

Josh (00:17:30) - Yeah. All right. Ken Centenario, again, thank you so much. Again, the,, your value creator and of course, the founder of corporate value Metrics, your website, corporate value. Net. Thanks, Ken.

Ken (00:17:41) - Thanks, Josh.

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