Quality Business Valuations.
Trisch Garthoeffner is the President of Anchor Business Valuations & Financial Services, LLC.
Anchor Business Valuations & Financial Services, LLC is a business valuation, litigation support and merger & acquisition transaction consulting firm. Anchor assists their clients through a broad capacity of services spanning from the determination of the value of a business to consultation on the financial implications and due diligence process of the sale, acquisition or investment in a company.
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Welcome to The Thoughtful Entrepreneur Show. I'm Josh Elledge, Founder and CEO of UpMyInfluence.com. We turn entrepreneurs into media celebrities, grow their authority, and help them build partnerships with top influencers. We believe that every person has a unique message that can positively impact the world. stick around to the end of the show, we're all reveal how you can be our next guest on one of the fastest growing daily inspiration podcasts on the planet in 15 to 20 minutes. Let's go.
And with us right now, we've got Trisch Garthoeffner, Trisch, you're the President of Anchor Business Valuations and Financial Services. Thank you so much for joining us.
0:44
Thank you. Thank you for having me.
0:46
So how does someone get into business valuations?
0:50
I just happen to stumble upon it. I was working in Manhattan for a number years I moved to Naples, Florida didn't really have the same type of work that I was Doing in New York City, obviously. So a friend of mine investment advisor had proposed that I look into doing business valuations for Family Law. So for equitable distribution in a divorce setting in the state of Florida, and from there I became certified through National Association of Certified evaluators and analysts. And then since then I've become certified through a CPA and have my certification also in financial forensics, enrolled agent, and so on and so forth. But I just happened to stumble into it just through a friend of mine saying there's a need there is a big pool of people offering services such as this, and it's something that I already had a background and and so it just took off from there.
1:43
So it sounds like you have a very particular set of skills, skills, skills that you've acquired over a very long career and skills that can make you quite helpful for people who need your services. I hope so. Yeah. famous movie quote there. By the way, my adaptation of That's that's Liam Neeson from Taken. Okay, so, so Trisch, how does when when do you when two people know to bring you in? And what is their need at the time? Is it just because they're preparing for some sort of acquisition or merger?
2:18
It depends on the setting. So if it's for litigation if it's for a divorce, it's typically the attorney will propose to them that they get a business valuation expert and then they'll suggest me and or they'll know me through somebody else. Or they might need it for estates and trusts purposes. So there again, an attorney might suggest that they use me for evaluation purposes for IRS. But there are also situations when someone is thinking about going to market and selling their business and a lot of times they don't necessarily intuitively know nor are they referred into somebody like me. It seems like in a larger metropolitan area moreso surfaces like I offer more ubiquitous but in smaller towns like this, it's a through word of mouth in terms of doing talks, writing articles getting the word out there. And business valuations are needed that you can't just use a multiple of earnings, you actually have to dig into the financials and see what your company is made of in order to get the most bang for your buck when you go to sell your company.
3:17
That's interesting. So in the case of like a family law situation, like a divorce, where, what are the situations where I guess if it's just like, Listen, it's just kind of a mom and pop business, and they're deciding to split. And so what do we do with the business? Right?
3:34
Right, right. And so it becomes tricky. So I quickly found out the first few years I started my company that if I was working with one party versus working as a neutral with both parties that I depending on which party I was working with the operating spouse, I was more likely to get obviously more information if I was working with a non operating spouse. I was I had a hard time getting the information so a lot of it ended up being not is cleaning is not as detailed as I would like it to be because we just we wouldn't weren't able to have access to that information. So ideally, I'd like to work with both parties if I can in a divorce setting, otherwise it becomes a struggle and it also becomes a battle of experts in terms of your I have to be objective, I have to be neutral with respect to my valuation that I put on the table. But not everybody necessarily abide by that those set of parameters which they should so becomes a becomes a battle of billable hours, it seems like some experts are trying to grow so we have to we have to be really careful.
4:37
So Trisch, my perspective, it seems like people a lot of business owners don't bother with valuations until they kind of need one. Is that is that what you see?
4:48
Yes. And that's what I try to get the word out that they should plan ahead because a lot of times people don't start to think about what is the value of their business until an intervening event. happens when somebody gets sick or it moves towards retirement or maybe just an unsolicited call comes to the table and, and they want to find out the value of their business. And frequently then they're more in a time crunch. And that's not ideal because you want to have your business prepared for sale. And I always say ideally five years at a time, at the very minimum three years, I had to hire somebody like myself certified valuation expert, come in, look at the financials, compare the financials to the tax returns. And if the to match up more evenly, it makes due diligence process, meaning the process of going through and confirming all the information is correct. It makes it so much easier, and increases the likelihood of a that you'll get more money for your business and B that the transaction will actually close in the sale world.
5:44
Yeah. Are there any rough numbers that someone could say? Well, obviously this is not going to be exact, but at least it's going to give us some sort of a ballpark is there is there a simple formula to get the ballpark?
5:56
Yeah, a lot of times what Business Brokers do in particular is they use multiples. So there's something that's called the earnings before interest tax depreciation amortization. It's called Eva.
6:08
Yeah, that's it.
6:11
And most businesses fall between most small businesses all between three and five times Eva. But that's, again, you have to be really, it can't just be a lot of times it's cocktail conversation. But you have to be really careful with actually using that multiple without looking at the underlying information. Because you might think that your company is worth say, five times multiple of EBITDA. But then when the due diligence process starts to go through, and you have a buyer on the table, and it looks like it's moving towards closing the potential acquires spending money on experts, and and they're getting excited about a transaction taking place, then they'll dig into the numbers and then they'll find out Wait, these earnings aren't exactly what you portrayed them to be. And it's not a five times multiple that we're willing to give. You're willing to give you a three and then That will kill the deal. So, yeah, a little bit extra in the beginning,
7:04
what are some of the things that that you're looking at a little bit more specifically just to you know, that are going to be those major deviations from that initial kind of guess at what you know what a company might be valued at.
7:22
So there are things called add backs so most In fact, every small company I've ever looked at and looked at thousands of them have run expenses through the business that are not operating in nature. So they might have uniforms but they're actually dresses that the audit White House black market, or they have marketing, but it's manicures or, and you've come through all of the expenses and all of those expenses that are non operating in nature and that are for the benefit of the owner, the shareholder, get added back to the EBITDA. So that's a big one non recurring expenses. So If you have a move, and you have to pay a big amount to move buildings within a long period of time, you might be in one building for 10 years. That's a one time expense that you're not going to have on a recurring basis. So you want to add that back, you want to make an adjustment there. Or if you have non operating expenses, then you obviously you need to add those back as well. And I always look over a period of time to see Is there some kind of pattern that's in place with respect to the percentage of adjustments that have taken place over a three to five year time period, because then that will allow me to see going backwards. Okay, this is most likely what the trend was historically, so that I can I can basically adjust and even out that cash flow and see what the true cash flow is. So I'd say those are the biggest adjustments that I would take into consideration and cash also small businesses. I valued a restaurant not too long ago and about 50% of the income was was not was was recorded, it was recorded in a separate book. So it wasn't actually on the financials I was looking at, I'd go to look at the numbers with the owner and he says, uh, wait, these numbers aren't accurate and he pulls out a different book and and they're they're all the cash sales that he's been tracking. So that obviously needs to be adjusted and considered and valuation.
9:21
So Trisch, you know, again, you're working on Wall Street and eventually major why Florida By the way, I mean, other than I mean, I know why I came to Florida. Why did you choose to come to Florida?
9:33
I actually loved New York City, but I have family here so I ended up moving here for family but I still I still miss New York and any chance that the temperature dips below 70 I'm putting on a boots and sweater So
9:48
as of when we're recording this it's actually very chilly in Florida. And when I say very chilly, everyone's gonna snicker. I think it's Oh, it's 53. So Oh,
10:00
Like 40 Yeah, yep.
10:05
You so you, you move down to Florida and you start your own practice essentially. And, and I know that you get a lot of your business now through word of mouth. But I think that, you know, one thing that I think deserves to be said as word of mouth doesn't happen overnight. It requires a lot of work to to get that and to set up those, all of those referrals. And so what were you doing in your first year to get things going,
10:32
I actually made a list of all of the referral sources in town and the two counties that are closest by and I set goals for myself. So every day I'd have to reach out to one person on the list and try to schedule a coffee and or lunch or dinner, drink, etc. However I could get face to face with them. I also made a list of all my competition so all the competitors that I had, and I tried to meet with each of them as well and I tended all the different benefits that I thought would be of use to for carrying more more workflow. So bar events and chamber events and things of that nature. And I did that consecutively, I'd say easily a year, probably two years and I also do a lot of talks. So any chance I could get to get in front of a bar association or the Women's Club or above board chamber or wherever I could get in front of and do a presentation I would as well and just get my name out there articles. A lot of pro bono work so a lot of a lot of free work, but not there. It was good. I mean, I had to get out of my comfort zone a bit because as an accountant, I'm not necessarily the most outgoing person so it took a lot of practicing in the mirror. Yeah honing in on my daughter's like six at the time was so sick of hearing about anchor business valuations, but it paid off. So
11:58
yeah, you don't you say? Something that you actually reached out to and sat down with your quote unquote competitors. And so I'm curious what is that? Call that initial call like a lot of people wouldn't consider that right? And they'd be like, oh my competitors or you know, it's me against them and and I don't want to even let them know what I'm doing that sort of thing. But what's your What was your approach?
12:21
So I think I was naive and I think that was it was in my play to my favor at that time. So I think now would I feel comfortable doing that? Probably not. But never having owned a business before and not knowing the smaller town service offering and my competitors I wasn't sure you know what exactly it would be like but I just reached out when friendly phone call and and or email and followed up and got something scheduled and, and I had to tell you, I there was there were a couple pseudo awkward moments, at least with one in particular that I can think of one gentleman who is now since retired as an interesting character and he had a cowboy hat on and he kicked his cowboy boots up on the table and put his hands behind his head and tried to tell me how it was all going to happen. And I had to drive to to the Ford dealership so he could pick up his car. So we became friends. And it was nice, but it was a little precarious to start with unusual.
13:20
Yeah. And so I would imagine then that you exchanged quite a few business cards or contact information in that first year. What would you estimate that that total number was a people that you got to know exchange information with you let them know what you do in that first year? So
13:39
I have
13:41
definitively over 1000 contacts on LinkedIn. So a dominance of them probably, I'd say half at least came within the first year. Mm hmm. I would say I probably probably in some way, shape or form touched at least 500 people
13:56
know, what do you do to stay top of mind stay top of With with your network?
14:03
Well, it gets tricky because if I'm working on cases that might require a lot of my time, then I don't get a lot of face time. And I don't get to leave my office, it seems like four weeks on it. So it's usually in January where things start to slow down. So now I'll start to schedule meetings. Like yesterday, I went to Orlando, and that was a contact referral source of mine and no client. So I'll just schedule meetings during this time of year and get my pipeline filled up again, and then, you know, it'll take off and it's pretty cyclical. It seems like year after year.
14:35
Yeah. Yeah, for sure. And so I guess over the next five years, what would you say your goals are for the growth? I mean, we already have a very, very successful practice, and congratulations on that. And where do you go from here?
14:50
Well, my daughter's now 13. So my goal within the five years is to get her off to college.
14:57
Yeah, right.
14:58
The one reason that I moved here Because of family and lifestyle that I could moreso afford and like to have in a smaller town, but I will probably end up opening an office and having more actual employees instead of using contractors. That's my goal. Within the five year time period, probably toward the end of the five year I already started talking to some people. And then as I mentioned to you earlier, I started finally getting my social media pages up and going and drugs Yeah, starting all these grassroot things that I don't really need to do but I think big picture I need to start planning and and so I'm trying to lead by lead by how I tell my clients to
15:37
Trisch, for someone in your line of work in the business valuation space. What are things that people could do to increase their authority?
15:47
increase their authority would be education. That's what I would say Yeah.
15:51
More letters behind your name are always helpful.
15:56
And and the tricky thing with business valuations is in This is why I get a lot of referrals from tax accountants is because you really have to stay on top of all of the changes and all of the different ways in which the valuation approaches or the the nuances thereof are changing within the the specialty of your peers. Because a lot of times, you could go to court and you could be testifying, and you want to make sure that you understand the report that the opposing expert has done, and that you're up to date on all of the all of the nuances of the ways in which valuation world has progressed over time period. It does take I get up every morning, an hour earlier, and what I would ideally have to and read for an hour every morning, on top of things
16:47
you don't want. One question, Trisch, forgive me I meant to ask earlier is If so, for example, so I've got a company and yeah, I would love to exit that company. You know As a great potential, what should I be doing? To get that business ready for sale
17:07
should definitely meet with a certified valuation expert such as myself. Sit down give three to five years of internal financials. Ideally, I typically get QuickBooks if I can get administrative access to QuickBooks, and tax returns any legal contracts or operating agreements, so forth by sell those types of agreements that are set up with respect to the operations of the company. And I'll do a full deep dive on the company from an operational and earnings perspective and be able to scour through and do a light forensics is what I call it because I don't do a deep dive on the forensic side. But I do go through each of the accounts and ensure that there are no outliers for year over year there no huge discrepancies if I have comparables in the marketplace to compare their peers to be similar type companies. I'd say like I said earlier, three to five years out So if they're thinking about a sale, the sooner the better. A lot of times what happens is a small company owners have unrealistic expectations as to what their business is the worst. And then when they get to the point of like we were talking about when they get to the point where they have to sell, they don't necessarily have the planning and the time to be able to plan accordingly. Right, and then they're disappointed by what their business is actually cash flowing and what they can actually receive for the business. And that's that could have actually a lot of times just been resolved with some proper planning.
18:32
Yeah. Well, Trisch, I want to thank you so much for joining us. Your website is AnchorBVFS.com. Right. Is that did I get that correct? Yes. Great. And again, congratulations on on the launch. Back when your daughter was, well, how old she was she at the time?
18:52
She was 5. 5, oh my
18:55
gosh. Yeah. Well, congratulations on that. Congratulations on your success. I know you do a lot of business here in Florida. And again so you are the President of Anchor Business Valuations Financial Services, certainly you know a business that's looking to get their valuation done whenever the reason is or even just preemptively. Your You sound like Trisch, a good person to know.
19:23
Hopefully, I think Yeah.
19:25
Thank you for joining us.
19:27
Thank you.
19:29
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