Why Every Business Owner Needs a Valuation

Speaker 1 – 00:00
Today we’re going to talk about everything from trustee estate planning, why you should get a business valuation
years in advance of doing a potential sale, and how the education empowerment can really set up peace of mind
and the legacy that you built moving forward.
Speaker 2 – 00:14
I think that’s the psyche of some business owners is that it’s easier to just deal with the urgent and important and
not the important and non urgent things like what we’re talking about. And so business owners aren’t used to
knowing and seeing what their value is on a daily basis. Anyone paying the estate tax was either ignorant or lazy.
There’s a reason that the rich stay rich for a long time and seem to always keep getting richer. You should be
running your business at all times as if you’re selling it tomorrow. If you’re not organized, you don’t have clean
financials to show the bank how quickly you think you’re gonna be able to refinance. Whether you’re doing estate
planning or you’re looking to sell, who you hire to do that analysis matters.
Speaker 1 – 00:57
Hey everybody, gonna love this episode. We’re talking about business valuation, specifically why you should get
one if you’re a small business owner. We’ve got one of the greatest experts in the country, Tom Gray, joining us and
today we’re going to talk about everything from, you know, trustee estate planning, why you should get a business
valuation years in advance of doing a potential sale, and how the education empowerment can really set up peace
of mind and the legacy that you built moving forward. Yeah, real excited about this episode. Welcoming Tom Cray,
one of the smartest minds in Pittsburgh. Little in the country for business owners that are either, you know,
planning on the sale and, you know, what happens next. So Tom does investment banking on the sales side and
then also does valuation. So Tom, hopefully I didn’t mess that up.
Speaker 1 – 01:44
If you can give us a quick background and what you’re up to now, that would be a great way to start this.
Speaker 2 – 01:48
No, that’s great. Happy to be here. Thanks, Matt. So I’m a managing shareholder with Strategic Advisors. We do
have a sister company, Holsinger, which is an accounting firm. But we’re primarily talking about investment
banking today. And for someone that has never heard that term before, investment banking is basically anything
related to M and A. So we’re not managing stocks and bonds and portfolios or anything like that. We’re helping
someone through a business, you know, transaction, a merger and acquisition, and then a lot of times also
potentially helping them plan for it or doing due diligence, quality of Earnings like all those sort of things. And so
there’s a lot of planning and things that go into that.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
1 / 27
Speaker 2 – 02:30
Our firm was started decades ago by Andy Bianco senior and then I also work with his son Andy Jr. And then we
have a team of three that work with us. And so you know, having all that experience on our bench is really critical,
you know, for helping clients with a variety of projects. But tapping into, you know, especially Andy Sr’s experience
and knowledge in the region and industries and stuff like that is critical and super valuable. So you know, every
situation is unique as you know, with your clients, every business, every industry.
Speaker 2 – 03:14
And so, you know, each one takes a different path and part of that is just planning and working with their trusted
advisors like you know, help them get sort of, you know, solve problems, achieve their goals, you know, and as I’m
sure you tell your clients, planning for all those things, you can never start too soon. So that’s what we preach as
well.
Speaker 1 – 03:38
Awesome.
Speaker 2 – 03:38
Well, Tom, I think there’s, we’ve worked.
Speaker 1 – 03:40
With you guys for over a decade now and you know, specifically for you know, business valuations, we’re going to
focus on today. I’ve noticed that there are, I think it’s really cool you guys have set up the ib, the investment banking
side to help the clients actually, you know, maximize the sale or get the right merger or acquisition, whatever
they’re trying to accomplish done. But yep, for financial planning, you know, especially small family held
businesses, there’s a lot of reasons to get evaluation that don’t have to do with, you know, maximizing the value of
the sale. So I’m going to start podcast one, we’re going to talk about all of those different situations, different
levers, you see and then we’ll do in podcast two, we’re going to talk about the straight from the sales side.
Speaker 1 – 04:20
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
2 / 27
Hey, if this is your life’s work, how do you maximize the value of your life’s work? And then is there any paradoxy
managed you sometimes take a little bit less of the value because you also want to respect the legacy and not
necessarily take the top dollar. So that’ll be podcast too. But so Tom, one of the main reasons we come to you is
for estate planning. So for example, we have a client that owns 100% of their business. They’re getting ready to
retire, they have kids in the business and they don’t necessarily want to give up control. They want to, you know,
transfer some of the business into irrevocable trust for estate planning purposes. So when you’re doing that,
obviously a client has a limited amount of exemption.
Speaker 2 – 05:01
So I don’t want to, you know,.
Speaker 1 – 05:02
Obviously a business valuation has to be fair, it has to be legal. But when looking at that purpose, how would you
go about advising the client and what kind of levers can be pulled to get a fair evaluation done for the purposes of
estate planning?
Speaker 2 – 05:19
Yeah, it’s a great question and topic. And business valuation is very nuanced and it’s not a strict science. You know,
there’s a lot of, you know, quote unquote art involved. And the purpose is super important to understand. And if you
think about a privately held business, there’s no ticker for it. And so business owners aren’t used to knowing and
seeing what their value is on a daily basis. And so that process is always interesting for them and they learn so
much. And so I highly recommend it for whatever reason purpose they’re looking at. But in the case you’re talking
about, when you’re doing a valuation at a point in time for a specific transactional purpose, you get into this in the
business valuation world, it’s called hypothetical willing buyer, willing seller.
Speaker 2 – 06:15
And so you put yourself as the valuation professional into this construct where the value you’re coming up with is
what a willing buyer would pay and what a willing seller would accept. And everyone knowing all the same
information, right? The highs, the lows, you know, everything all together. And so, you know, that’s just a weird
scenario, right? Like, that’s a, they call it a hypothetical for a reason that’s never actually.
Speaker 1 – 06:42
And Tom, real quick, I think it’s a good segue. What’s the risk to get that wrong? And the reason I asked is I can
think, okay, if the client is gifting and has a limited amount right now it’s about $15 each that spouses can gift to
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
3 / 27
the next generation without tax. Obviously, the IRS may be looking at that. If the, if the client dies and is worth more
than that, they’re going to say, hey, I could get 40%. If the value is above that, I’m going to go challenge. That is
what other. If there’s the beneficiary of a trust that’s unhappy, like kids don’t get even split. They could go challenge
what are all, like, what’s the risk of not getting that right? And I guess there’s no exact like, science of right. But like,
what’s the, like what’s the downside?
Speaker 1 – 07:27
Of not having that rock solid. So if a client comes to you and say, no, like we need it lower, and you’re like, wait,
wait. What are the risks involved with that?
Speaker 2 – 07:34
Yeah, I mean, we always talk through that with clients and their attorneys. First and foremost, you know, to
understand, you know, a lot of times when you’re doing a valuation, you’re looking out in the future, you know,
you’re picking a date and time that you’re doing it as of. But the value of that business, you know, the future is
super important. I don’t know the future. The client doesn’t know the future. So they might tell us that, oh, it’s
terrible. It’s, you know, and who are we to challenge that now? We, we vet that and we analyze it and all those
things. But at the end of the day, you know, the client has the ability to sort of, you know, I mean, they could literally
lie to us and they sell rep, they sign representation letters.
Speaker 2 – 08:20
But that whole conversation is, is critical to understanding that. And a good attorney needs to be involved in that.
It’s also one of the reasons that, you know, when we’ve worked with you is we advise, you know, we be engaged by
a client’s attorney so that conversations can be privileged and things like that. And that’s not because we’re trying
to get one over. In the irs, you just have to be able to have confidential, you know, conversations for sure. Clients
ask questions and make decisions without, you know, being worried that might, you know, discover they are taking
a.
Speaker 1 – 08:54
Divorce or a beneficiary.
Speaker 2 – 08:56
Right.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
4 / 27
Speaker 1 – 08:56
Or whatever.
Speaker 2 – 08:57
Or taken out of context even. I mean, that’s, you know, that’s the, you know, big problem. And you just want to be
able to speak candidly, you know, all the time. And so, you know, the risks other than, I’ll say familial, you know,
problems or IRS disputes, you know, is an IRS issue. And so when you’re doing gifting or estate planning, you know,
and you put a valuation on something and it’s, I mean, in a very simple situation, if you have a, this happens a lot.
You know, you have a family limited partnership that has real estate, sometimes there’ll be a brokerage account.
There’s some case law out there where people had a brokerage account with a million dollars in it and they set up
these FLP structures and did non control situations and they’re discounting that million dollars down to almost
nothing.
Speaker 2 – 09:54
And the IRS looks at that substance over form and then you get challenged on that. Then you get, you know, you’re
up there testifying in tax court and in trying to defend how $1 million of cash is really only worth, you know,
100,000 or whatever it is. You know, obviously that’s an extreme case, but, you know, the same concept is true for a
business. You know, if you’re putting something out there that’s clearly suppressed and really low, you know, you’re
running the risk. The IRS challenges that you can have penalties, interest and, you know, all those bad things.
Speaker 1 – 10:31
Would you say the risk for that? So let’s say a business is actually worth, I’m just making up numbers, 50 million.
Like that’s. And you don’t know that, but the clients, like has shaped this narrative and you’ve, you know, they signed
off, the attorney signed off, and it turns out the irs. Have you seen the case where they’ll make a gift? Because I
believe there’s a three year look back and a five year look back at certain things. If you’re gifting assets upon death,
you know, for different, like Medicaid pullback, how does that work with a business valuation?
Speaker 1 – 11:00
Like if someone’s 40 years old, gifts a large portion of the trust, how likely is it the IRS is going to look at that while
that person is young and living versus and I’m not asking for statistics, just from your experience and then how
much, I would guess it’s much more likely for an older person that then dies and it’s a recent gift that occurred
that’s going to be scrutinized higher. So do you have any comment on like the risk factors of the age and the timing
of that?
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
5 / 27
Speaker 2 – 11:26
Yeah, thankfully, I don’t have any experience with our valuations being challenged, so I.
Speaker 1 – 11:33
Can’t speak to your work, I’m sure.
Speaker 2 – 11:34
Well, I can’t give you firsthand, you know, experience with that. But, you know, the way I counsel clients on this is,
look, you know, is it worth not sleeping at night whenever someone might challenge it or this comes up. Right. And
it’s just like anything else that you do, whether you are taking tax deductions that you shouldn’t or doing something
like this, do you want to have that out there that you’re worried where you literally have a calendar reminder set for
when the statute of limitations runs out on your tax return or your gift tax return or whatever the case may be. Me
personally, that’s not how I want to live. And that’s not the type of work product that we put out There. So, you
know, I don’t. I definitely don’t have any statistics on it. You know, there’s.
Speaker 2 – 12:23
Every year there’s different case law that comes out, and they tend to be extreme situations where someone was.
Yeah. Someone was really doing something, you know, aggressive and trying to take advantage.
Speaker 1 – 12:37
They call it that Dirty Dozen list, or there’s more list, I’m sure, than just the Dirty Dozen list, but, like, the really
aggressive strategies the IRS literally publishes. Like, we’re going to heavily scrutinize each.
Speaker 2 – 12:49
Yeah. And then. And then there’s also, you know, business valuation or cases that come out that, you know, where
sometimes it’s. It’s debates on real hypothetical, current, you know, events that the profession looks at and learns
from and adjusts their approach. And then sometimes it’s just clearly obvious that someone was trying to get one
over and do something that they shouldn’t. But then there’s lots of things that no one ever hears about because it
gets challenged and there’s a settlement that isn’t public necessarily.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
6 / 27
Speaker 1 – 13:27
Yeah, yeah.
Speaker 2 – 13:28
So again, our approach is always, we want this to be on the fairway and let everybody feel good about this and, you
know, sleep well at night.
Speaker 1 – 13:40
Let’s go through a specific. All super helpful, Tom. So let’s go through a specific example. Let’s say I come to you
with a client. You can pick the industry, the business the client thinks is worth around $50 million. We do basic
EBITDA multiples or, you know, and the. No estate planning has been done. Let’s just say One spouse owns 100%
of the business. They’re married with two kids. Just all, you know, good family dynamics. So their total is worth.
They’ve got 10 million outside the business. So the total net worth is 60 million. We do the estate plan, say, hey,
you know, if you die, half 30 million is going to go tax free to your kids. Because each of you, I’m just using
approximate numbers, IRS, 15 each. The other 30 you live in Pennsylvania gets hit with a 40% federal tax.
Speaker 1 – 14:26
That’s 12 million goes gone. Business isn’t necessarily liquid. So are you going to use the 10 million that’s liquid to
pay the tax on the business or the kids, even capable of running all questions that need to be addressed in a
planning scenario. So, and then in Pennsylvania, you know, four and a half percent of the, you know, the whole
thing, outside of certain things like life insurance would. Would not hit the Pennsylvania tax. So huge tax
considerations, you know, 12. And just doing some quick math, what’s four and a half of 60? I think 2.7. Yeah, I’ll
trust you on that. Yeah. So 4. So, yeah, we have a $14.7 million tax bill. Basically 25% of the net worth is going to
go up in flames. The irs.
Speaker 1 – 15:09
So we come to you and say, hey, we have a big issue, but we have a bigger issue. AI is making this business thrive.
So they expect to grow from 50 to 100 in the next three years. So we say, tom, we need to get some of this
business interest. He’s unsure if he wants to sell. He or she is unsure if they want to sell to private equity, if they
want to sell it outside. They’re not, their kids aren’t old enough yet. If they can get the kind of the vibe if the kids are
going to really take over. So we need to address, ultimately, they want to keep control and they want to address the
taxes before the tax. Can’t say. So we come to you and say, hey, we wanted it.
Speaker 1 – 15:53
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
7 / 27
We want to get this business valuation done because they haven’t used their exemptions and the spouse that they
want to keep control of the business, but they want to transfer, let’s just say, 30% into a common strategy. We use
Spousal Life access trust, so 15% on each spouse. They don’t have a prenup, they don’t have a postnup. So, you
know, happy marriage, but what’s mine is yours. So we want to, you know, keep those relatively even. And so if we
use that, you know, 50 million before it goes to 100 million, they’re essentially using four and a half million dollars,
a third of their exemption. But then all of the growth in the business in that chunk, that 15% is out of their estate
forever. If it’s an S corp, the distributions go in there.
Speaker 1 – 16:34
So that really takes a big chunk of future tax liability. If the business grows the way we think it is, off the plate
forever. So to get this done, we need a business valuation. And the goal is we want to use as little as the
exemption as we can. So they’re coming to you and saying, hey, we want this to be, like you say, down the fairway
legal. How do we get this as low as possible? Here’s the fact. So what would be some obviously legal facts that
could get the client into that valuation quickly to get that transfer done.
Speaker 2 – 17:10
So the first thing I’ll point out before we dive into those details is that scenario that you laid out, there’s even more
urgency to do something like this, because in that situation where you say the business is worth 50 million, that’s
illiquid, right?
Speaker 1 – 17:25
Yeah.
Speaker 2 – 17:26
You know, and in the scenario where now, you know, that goes into the estate, likely that person that passed away
was very valuable to the business. So now that business might not be worth 50 million, it might be worth
something less. And so now you’re trying to sell a falling knife. So not only have you know,.
Speaker 1 – 17:48
The liquid money’s paid the government, right. And now all you’re left with is a business, and now you have to sell it
at a fire sale.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
8 / 27
Speaker 2 – 17:54
Right. And if you’re, you know, when you’re doing the. It’s just a messy situation. And so, you know, all this planning
and doing these things, you can never start early enough. One of the sayings that one of my partners in Holsinger,
Bill Collier, always says is that anyone paying the estate tax was either ignorant or lazy, because with enough time
and effort, you can plan your basically way out of that. There’s a reason that the rich stay rich for a long time and
seem to always keep getting richer. And so you’re absolutely right. There’s lots of different strategies for that. So,
you know, to get into some of those details, you know, you mentioned, you know, taking out 15%, you know,
interest.
Speaker 2 – 18:43
So when you think about, you know, the construct of owning a business, you know, when you buy stock of, you
know, whatever public company you want to pick, you’re just along for the ride. You don’t have any control unless
you have a significant piece. And, you know, you can exert effort, but for the regular person, not happening. But
there’s a ticker price and that share of stock, when you think about it, there’s some valuation things that are like, the
market is valuing that every single day. Yes.
Speaker 1 – 19:16
100 Shares of Amazon is X, Right.
Speaker 2 – 19:21
For a private company, there’s no ticker. And so if I come to you and say, matt, I’ve got this great opportunity for
you to own 50, 15% in Holsinger, based upon that, you get no control. You don’t work there. You don’t have any
ability to change or do anything. You can’t change management, you can’t do anything.
Speaker 1 – 19:42
It could probably be bought out anytime without buy, say, right? Because I don’t have a right.
Speaker 2 – 19:46
We might have a buy sell agreement that makes it restricted, that you can’t sell it, you can’t transfer it, you can’t do
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
9 / 27
anything with that interest. And we might be the most profitable business in the world. But me and the
shareholders might bonus out all the profits to ourselves so that your 15% doesn’t get a distribution, you get
nothing. So the concept there is that a minority ownership in a business is not worth as much as a majority
shareholder. And so in the valuation profession, when we say that overall business is worth $50 million, if you
carve out a 15% piece, it’s not worth 15% of 50 million, it’s worth less than that. And we call that discount for lack
of control. And there’s ways to calculate that and there’s studies and things that we use and that’s really important
to have that supportable.
Speaker 2 – 20:51
That’s one of those areas, I’ll say of art, you know that, that go into the valuation. And then there’s also another
discount called lack of marketability which means you have that, you know, minority share. How do you sell it?
Who’s going to buy that? Yeah, you know, you’re sitting there, 15%, you’re not getting any value out of it because
you don’t have any control it. And so those two, especially if it’s.
Speaker 1 – 21:17
In a trust too, then it’s really locked down. Does that have any factor into it? Yeah, if it’s a non, like a non voting
share that owns or that the trust owns non voting shares and you kind of. I think we’d have both of those, right?
Speaker 2 – 21:31
Yeah, it’s in any project that we do, we’re always setting up the construct. So is it, do you have, is your interest
marketable? And that depends on the attributes, the agreements that are involved in that ownership interest. And
then do you have control? You can have a 1% interest in an entity and have the only voting ability. So you still have
control from that perspective. But you know, so the point is that like however that entity is capitalized, we have to
understand those things up front and know what the attributes of that interest being valued are. And then if it is a
non control, you know, non marketable piece, you know we’re going to be the answer to that is going to be less
than that 50 million, you know, in that, in this scenario you laid out. Right.
Speaker 2 – 22:37
So and it, that’s a kind of a weird concept where someone will say well if you’re saying 15% is worth X and then you
know, when you do the math, it doesn’t equal 50 million. Well it’s because the parts don’t equal the whole.
Speaker 1 – 22:52
The facts of that transaction are the it wouldn’t be worth that much by itself. Right. Because again, yeah, you’re not
selling the whole business. You’re not. Yeah, right.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
10 / 27
Speaker 2 – 22:59
In the real world. And I’ve been at valuation conferences before where these concepts are being talked about and
discussed in the art behind calculating. Well, how much of a discount and what, you know, because like you said,
when you’re doing it for this gifting purpose, you’re trying to, you know, get it low. And I’ve been in a room of
hundreds of valuation professionals where someone stands up and says, you guys are all crazy. There’s no
hypothetical world in which anyone would pay anything for a non controlled, non, you know, marketable piece of a
privately held up company. What are you doing with that? If you can’t sell it, you don’t, you’re not promised income
from it. You’re like who, who would ever pay hardly anything for that. Now I don’t know if that individual is putting
out reports to say it’s worth zero.
Speaker 2 – 23:52
Likely not. But when you actually think about that, it’s sort of a compelling argument there.
Speaker 1 – 24:01
So that could be a big lever depending on the industry, depending on the importance of, you know, if it’s a family
held business and there’s really tied to certain people driving the business, those arguments could really be strong
versus if it’s, you know, the owner doesn’t even have to work. It’s just more of a passive, I think. Does any of that
have to do with the. If the IRS were really auditing and I’m sure they would look at all.
Speaker 2 – 24:23
Those factors or it’s the people do matter to some extent, but it’s typically more the legal, you know, okay, set up
and structure, gotcha and attributes and just like, you know, that sort of overall. But you know, kind of the general, I
would say rule of thumb. It’s not a rule of thumb, but just sort of, you know, high mile markers. I’ve heard a lot of
estate planning, you know, attorneys say that, you know, that you can kind of count on that discount being
somewhere between 20 and 40%, you know, and it just depends on the situation. Sometimes it can be lower.
Anything higher than that is probably starting to get pretty aggressive. I’m not saying it can’t be, you know,
accurate, but you know, you can have scenarios where you’re. It’s pretty significantly different.
Speaker 1 – 25:13
Yeah.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
11 / 27
Speaker 2 – 25:13
You know, than like the 50 million high level.
Speaker 1 – 25:16
Yeah. No, no question. And that’s the importance, I think, of working with a good business valuation expert that
has the knowledge to like, hey, have those frank conversations through an attorney. So they are, you know,
privileged, and then also put it in the fair way. So it is, you know, blessed by an audit, you know, hypothetically, or a
family disagreement, whatnot. So, yeah, okay. This is obviously very important, something we deal with every day
with, you know, small business owners and clients and succession planning and kind of thinking about the next
steps. But let’s say, hypothetically, I’m a client. Like, you’re literally describing my situation. I need to get this done. I
need to get a business valuation. Just, like, not in detail, just like super high level. I come to you. What are the next
steps? Like, what are you asking me for?
Speaker 2 – 26:06
How many years back?
Speaker 1 – 26:07
What should I have prepared in advance to make the process smoothly? And then ultimately, if I’m like, tom, I need
to get this done tomorrow. Like, what’s the actual time frame? If I cooperate and I’m like, on the ball, documents
getting back to you within, like two days, let’s say at all times. What is paint a picture? Like, just, again, high level,
what does it look like? Because I think a lot of people think about this. Like, I don’t have the time. I don’t have the.
What I’ve seen is like, this.
Speaker 2 – 26:31
You.
Speaker 1 – 26:31
You guys take like all this stuff, but if you have it organized and it’s like the client really doesn’t have to do anything
until, you know, it’s done, or a couple. A couple of pieces along the way.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
12 / 27
Speaker 2 – 26:40
Yeah.
Speaker 1 – 26:40
What does that high level look like?
Speaker 2 – 26:42
It’s a great question. I would say it all depends on what you’re looking for. You can get a. You can get a valuation
report.
Speaker 1 – 26:50
We’re talking still, we’re going to ask the same question. If I’m trying to sell my business for the maximum value.
But we’re talking about this estate planning,.
Speaker 2 – 26:57
Family static report, the date and time.
Speaker 1 – 27:00
Yep.
Speaker 2 – 27:00
Yeah. So if, you know, there’s, you know, organizations out there that, you know, you can buy a software and run a
business valuation on it. You know, you can. And there’s groups, you know, national groups that you can go out and
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
13 / 27
do, you know, different things pretty quickly. And they’re using, generally speaking, you load in the historical
financials and they do some things. And I’m not saying it’s not a good valuation. It’s obviously, you know, products
out there and, you know, but, you know, so there’s. Those things are accessible, you know, if you’re looking to get
your trusted advisors in a room and talk through all these different qualitative things and stuff like that, obviously
it’s a long process but I would say, you know, from a timing perspective anything in America is possible just
depends on how much you really want it.
Speaker 2 – 28:00
But I’d say a quick timeline would be a month and you know, probably more reasonable is a month to three months
and it can take longer than that. Just depends on how quickly you’re looking to, you know, move.
Speaker 1 – 28:15
I’m a month. Sign me up. Tom, what do I, what am I uploading in the secure link that you sent me? What are you
asking for on a backwards or go forward basis?
Speaker 2 – 28:23
Yeah, so definitely historical financial statements, tax returns. If you’re getting audits or reviews done, we want to
see that stuff we’re going to be looking at trial balance, networking, capital, you know, all those sort of things. And
then we’re going to want the qualitative documents formation. If you’ve got operating agreements, buy sell
agreements like all those sort of things. We need to understand the cap table. If you’ve got different, you know,
types of stock and you know, all those things are important, you know, we’re going to look at on a forward going
basis. The forecast is really important. Some businesses don’t forecast out for a variety of reasons. Some have
really detailed forecasts. If they don’t have that at all then we need to work together to, you know, put that together
using management’s inputs and their assumptions and build that out.
Speaker 2 – 29:19
So that can add a lot of time if that’s not something that’s ever been done. Other things that we would definitely
want to look at are appraisals, if they’re out there of hard assets or other things. If there’s intangible assets
involved like patents, software and things like that, those things could come into play. So you know, depending on
the industry you could have, you know, different needs.
Speaker 1 – 29:46
So if it’s a service based business, no audit financials, you’re basically, if I’m hearing correctly, maybe like three to
five years of backwards tax returns of prior tax returns plus like profit or loss statements plus the balance sheet of
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
14 / 27
the business on just like a basic, like small business. No, you know what I mean?
Speaker 2 – 30:05
It’s a starting point. Yeah.
Speaker 1 – 30:06
For a service based business with no hard assets. Yeah, that would be. And then for a more of like a. I’m just
thinking of some of the clients who share when there are assets involved. Then it becomes having. What I’m
hearing is having up to date clean records and reporting and books. Make this process for you guys a whole lot
easier. Oh yeah. Than the guy that like is running, you know, I know not to, you know, some client that, you know,
end of the year they’re scrambling in an Excel spreadsheet, looking at every expense and they don’t have books.
And like their business is worth like $20 million. I’m like tire bookkeeper. It’ll be worth your time.
Speaker 2 – 30:47
I’m biased, you know, because I’m in the accounting, investment banking world, but I always think being organized
is worth it. Yeah. Because, you know, and you could, you know, just being candid. I mean, sometimes for a
business owner, being unorganized doesn’t matter. Like because they’re running the business and they got it in
their head or whatever and they can pull it off. The problem is it doesn’t matter until it matters. And then it’s
terrifically hard to then get organized and expensive because now you’re rushing, it’s tight window, more transfers.
So as an example, whether it’s for estate planning purposes or you just have to go and refinance your debt. Yeah. If
you’re not organized, you don’t have clean financials to show the bank how quickly you think you’re going to be able
to refinance. So I think that there’s lots of.
Speaker 1 – 31:42
Reasons to stay on top of it.
Speaker 2 – 31:44
Yeah, I think that hygiene is really important and the reason that is really important for evaluation. You know, we
just kind of talked about it high level. The first step of the process is if, let’s just assume the valuation date is, you
know, 12-31-25, we’re going to go back and do what’s called recasting, probably of the last three years of results.
And so that recasting is really important. So in a valuation construct where it’s hypothetical buyer and seller, the
buyer is looking at the business and saying, what are the cash flows that. That I’m buying. Right. And so if you have
a business owner and for the past three years he’s got, you know, and I’m being agnostic to like tax deductions and
stuff like that. And so I’m not going to say that this is like bad from a tax perspective.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
15 / 27
Speaker 2 – 32:39
But, you know, there’s a lot of business owners that run personal expenses. The business pays for them, whether
they take them as tax deductions or like, we don’t need to get.
Speaker 1 – 32:47
Yeah, yeah. Whether they do or not speak to that enough.
Speaker 2 – 32:49
Right. Yeah, I’m sure.
Speaker 1 – 32:50
Oh, I spend 25amonth. And then they sell their business like, well, I actually spent 50amonth because of all the
stuff that was running through the business books.
Speaker 2 – 32:58
Right. So, so you know, we need to sanitize, you know, sometimes, you know, sometimes there’s also extraordinary
things that happen. Like most recently, you know, the PPP loans and ERTC funding that a lot of businesses got. A
buyer is not going to pay you off of an EBITDA that includes that revenue because it’s not recurring, it’s not
business related.
Speaker 1 – 33:22
You look at all those one offs.
Speaker 2 – 33:24
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
16 / 27
Yeah, you have to go back through and almost, not always, but most of the time that’s an accretive process to
valuation. So you go back through that and you want to take out all expenses. Like sometimes you have an owner
that has family members on the payroll and you know, and you’ve got a, you know, the kids are interns, you know,
sweeping the floor and they’re getting paid $80,000 and you could probably get somebody to do that for 10 grand.
Well, that’s a $70,000 increase. The a times a multiple. So you have to go through and you have to, you know,
another great example is a lot of business owners will buy the building or the land and then rent it to the business
as a way, you know, to do some, you know, different things or estate planning.
Speaker 1 – 34:12
What they may inflate that.
Speaker 2 – 34:13
Right. It could be inflated or it could be deflated. Deflated. And so you have to adjust, you know, for all of those
things you have to take out assets that are non operating. So if a owner has, you know, $1 million of equities that
isn’t part of, you know, working capital needs of the business. They just haven’t taken the cash out. Which is not a
great idea in my opinion anyway.
Speaker 1 – 34:38
Yeah, yeah.
Speaker 2 – 34:38
That now, it’s, now that money’s subject to business risk. But besides the point, like you wouldn’t include that
million dollars at the end as part of the value necessarily, you would try to take that out as a non operating asset.
Same thing with liabilities. Like if there’s a liability in there that you know, is owed to a related party that’s not, you
know, part of operations, then you know, you might adjust that stuff out. So that is a really important process. And
if you’ve got sloppy records and it’s, you know, and you don’t have a good CFO or controller that knows the details
on all that stuff, that process can be terrifically hard, time consuming and if you just miss things, you could be
losing out on value. If you’re trying to sell, you know, you could be Losing out on value.
Speaker 2 – 35:28
Or conversely, if you’re not coming up with those things and being fair about them, you know, you could have a
undervalued report that if, you know, the IRS looks at that, it’s pretty easy to pick some of that stuff off. Yeah. So
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
17 / 27
that’s a really important process. And then that a similar process, but different, is looking at the forecast. And so,
you know, you had the example previously where the. The business knows it’s going to grow a lot from 50 to 100
double.
Speaker 1 – 35:58
In the next three to five years. Hypothetically. Yeah.
Speaker 2 – 36:00
Right now, yeah. Of course, that’s speculation.
Speaker 1 – 36:02
Yeah.
Speaker 2 – 36:03
But one of the concepts that also is true in valuation is if my date, business valuation date is 1231, 25, I might be
doing this in the third or fourth quarter of 2026. And let’s say that it started to come true, what we thought. You go
back in your mind and you do that valuation as if you’re at 12, your toes are on the ledge of 12, 31, 25, and you’re
not allowed to look into 26. In other words, you’re using available information as of that date. In a crazy scenario
that I saw.
Speaker 1 – 36:49
Once,.
Speaker 2 – 36:52
It was a business litigation related to value, the valuation date was prior to a natural disaster. The natural disaster
basically resulted in this business becoming not worthless, but like significantly decreasing the value of that
business. Because the valuation date was before that, we had to pretend like it didn’t happen. Now we disclose in
the report what’s called a subsequent event and you say, yeah, this happened and it had an impact, but we didn’t
calculate that. It wasn’t contemplated in our value. But in that scenario, we knew that this terrible stuff happened,
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
18 / 27
but we had to value it in a way and think about the future as if that wasn’t going to happen.
Speaker 1 – 37:43
Interesting.
Speaker 2 – 37:47
And the same thing would be true is, you know, if you’re doing evaluation prior to someone passing away or
something like that, you pretend like that didn’t happen, which is a weird situation.
Speaker 1 – 37:58
Well, in that situation, like if it’s an estate plan and you could decide, well, which is bump, because it’s there to say
it’s the business owner’s decision if they’re going to move it to the trust and say, we’ll just do this in 26 and do the
valuation in 27, looking back to the end of 26. Right. But if it’s like a death, a divorce or something like that, like
you’re. Like you just described, it’s like that really is unfortunate. But that’s just the way it is.
Speaker 2 – 38:21
Yeah, I mean there’s, with stuff like that, if you have to include a significant event and obviously there’s different
purposes, like sometimes it’s litigation or death or whatever the situation that brings up the valuation, it’s all
circumstantial. But the point is that up front, the date of the valuation matters significantly, particularly if you’re
dancing around some different, you know, really significant events. And you don’t. Sometimes you have the luxury
to pick the date and sometimes you don’t for whatever reason, but that’s really important. That’s sometimes hard
for business owners, you know, to think about, you know, and just to kind of get them get there mentally. But you
know, going back to the forecasting of the future. So one of the valuation approaches that uses called the income
approach, and so that’s basically looking at the cash flows the business is going to produce.
Speaker 2 – 39:24
So if you’re looking out into the future, you’re doing a discounted cash flow analysis. You’re projecting out at say
three or five years, generally speaking, what are the cash flows that are going to be and then your present value
back today that, you know, the discount factor that you use, you know, includes concepts, you know, of, you know,
cost of capital and risk. And so when you don’t know that something is going to happen for sure, you think, oh, the
business is going to double. You don’t, you know, you’re not saying that it for sure is, you know, so you’re cut in half.
Who knows, right? You build risks. You know, there, you know, there’s, and it’s very, it’s definitely art, you know,
you’re trying to determine like what is the risk of this, you know, not happening.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
19 / 27
Speaker 2 – 40:21
How, you know, sometimes we’ll adjust that factor based upon how conservative or aggressive managers
forecasts are, you know, things like that. So it’s really nuanced. You’re, you’re almost never going to get two
valuation professionals that look at the same. Yeah, you know, construct and come up with the same exact
answer. It should be within a range. You know, I’ll call it a fair way but, you know, you’re not going to get the exact
same opinions and answers across, you know, almost every.
Speaker 1 – 40:52
Yeah, well, I found like with the, let’s bring up the psychological part of, you know, planning or business valuations
is there’s. So the more successful you get, like life doesn’t get easier. It, it’s just a different type of hard. You have to
deal with and so there’s these paradoxes that you can’t. You’re as a business owner or successful, you’re used to
like being able to fix everything. There’s these situations that you can’t fix. It’s how well can you keep it in the
fairway between avoiding one extreme and like sleeping at night and making sure your goals are supporting your
life and not vice versa. Like you’re having it at you adapt your life now you’re under IRS audit etc.
Speaker 1 – 41:25
So with Tom Eddie, I do want to shift into and just announce like next week’s podcast, we’re going to go in detail
about how to. If you’re on the sell side. We’ve been in situations where, you know, business valuations done
because we, you know, the business owner thought they were going to sell and end up not selling because we just
looked at the marketplace and was like, you’d better off just keeping this. Just look at the cash flow you’re
generating and what you’re.
Speaker 2 – 41:48
Right.
Speaker 1 – 41:48
So we’re going to talk through all that on the sell side. But while we’re talking about this for the, you know, the small
business owners, keeping it doing estate planning, any closing thoughts for the audience before we close out
today’s episode?
Speaker 2 – 42:01
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
20 / 27
Yeah, I think it. And I’ll, you know, I think this relates to whether you’re doing estate planning or you’re looking to sell
one. Who you hire to do that analysis matters. So if you’re hiring, you know, your CPA that you’ve worked with for
30 years that does one valuation a year, you know, I’m not saying they can’t do it, but are they going to be
consultative on, you know, selling value or all of these different nuances and things like that? So that’s kind of the
first thing is, you know, picking someone that understands both the science of, you know, the estate planning
valuation and, and all the, the discounts, you know, that you can apply and things like that, but then also
understands how things happen in the real world.
Speaker 1 – 42:54
Yeah.
Speaker 2 – 42:54
So, you know, and that’s why I love what we do is that we do both. And so I can talk to a business owner about all
of that. Not all at once because then it gets kind of confusing. But again, purpose matters of what you’re doing. But
you know, what I tell every client is you should be running your business at all times as if you’re selling it tomorrow.
Why would you not makes you the.
Speaker 1 – 43:20
Business owner and it makes you have an attractive business.
Speaker 2 – 43:22
Correct. And so how can you run it as if you’re always selling it if you have no idea what the value is or how the
market will value it, how, what multiples in the industry are typical? Understanding just some of the concepts that
we talk through is really important. I mean, there’s lots of times when we talk with business owners and they have
wildly outrageous differences of opinion of what the business is worth. Sometimes it’s low, sometimes they’re like,
I can’t believe someone would write me a check for that. It’s real, we’ll go get it for you. So, you know, I think that,
you know, business owners, you know, a lot of times they’re so focused on growing the business, taking care of
their employees, their legacy and all these, and they don’t want to think about selling.
Speaker 1 – 44:16
Because it’s not, it’s attacking their identity in a way or it’s not attacking, but it’s. They don’t know what’s the next
chapter.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
21 / 27
Speaker 2 – 44:23
It’s an emotional thing because, I mean, some of them just say, I’m never doing it because, you know, private equity
can’t do it. I don’t have any kids. No one else can do what I do. Well, you know, the cliche father times, undefeated.
Like someday this is going to happen whether you like it or not. And so, you know, being a good steward of that
asset for your family, for your employees, for your customers, for everyone involved, all the stakeholders in that
business, being planful and knowledgeable about how it’s valued, how you might exit, whether you’re planning for it
or not is super important. And sometimes I have business owners that have wildly successful businesses, you
know, tons and tons of profit and things like that.
Speaker 2 – 45:14
And I’ll say, you know, we can do a lot of work for you for really not a lot, you know, like let’s say 20. I’ll just make up
numbers. You know, someone that, you know, makes $5 million a year and they’re like, yeah, $20,000 is not
interested in spending that today. It’s like you’re not interested in, you know, learning about how the business might
be valued by a third party.
Speaker 1 – 45:42
Yeah. Or, or what the market making 5 million a year, they’re probably running a hundred million dollar business.
And it’s like, well, that’s like, yeah, I don’t know what the percentage point, but like a minute of a stock market
fluctuation in their portfolio.
Speaker 2 – 45:54
Right. They’ll drop, you know, 20 grand for a weekend trip, you know, to the Caribbean or something. But so I’m not.
And I don’t think it’s because they’re being cheap. I think it’s because it’s an emotional, it’s an emotional door they
don’t want to open. They don’t want to start thinking because they know that part of that process is me or
someone else asking them questions like, well, who’s going to run this? What’s your succession plan? What are you
going to do about this customer concentration that you have? You know, you got one customer that’s 50% of your
revenue. How are you going to deal with that? They just don’t want to, they just rather not deal with it. Not deal with
it?
Speaker 1 – 46:36
Yeah.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
22 / 27
Speaker 2 – 46:37
You know, or you know, your son’s in the business, you know, can he take over? Yeah, like so they have to answer.
Speaker 1 – 46:48
The toughest questions that they’ve been losing sleep over, but compartmentalizing for years probably.
Speaker 2 – 46:54
Right. So it’s, you know, instead of. And that’s, I think that’s human nature. I mean I, for me, sometimes I look at my
to do list for the day and I’m like, I don’t really want to do that one. And I like, well, that’s the one I’m doing first
because that’s probably the most important and hardest. That’s why I don’t really want to do it. And that’s, you
know, I would say that I think that’s the psyche of some business owners is that it’s easier to just deal with the
urgent and important and not the important and non urgent things like what we’re talking about, whether it’s estate
planning, no question or understanding valuation, thinking about transition planning, whatever it is. But I don’t
know how you keep the mindset of always selling your business. I think you’ve talked about it.
Speaker 2 – 47:53
You get one every year. Every week.
Speaker 1 – 47:55
Yeah.
Speaker 2 – 47:56
Okay. Every week.
Speaker 1 – 47:57
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
23 / 27
I’ve been this industry where private equity is all over and we’ve decided no private equity, we’re keeping this
employee owned and.
Speaker 2 – 48:04
But I think it’s still a valuable exercise to look at the value because you’re identifying then the things that are going
to add value and be accretive to everybody involved. Isn’t that the purpose that we’re owning businesses or running
them is to build value? So anyway, I think there’s so many reasons that it’s important and valuable.
Speaker 1 – 48:27
So three quotes that I’ve lived by and I’ve always shared with clients. So one is, you know, Life, rewards for life,
basically success or rewards you for the amount of uncomfortable conversations you’re willing to have. And these
are all small business owner. Yeah, uncomfortable conversation. The second one that I’ve really, you know, helped
me start my own business and leave the prior broker dealers. That was easy decisions, hard life. Hard decisions,
easy life. So always make the hard decision. In the short term it’s going to be awful, but it will lead to an easy life.
So doing this planning is very hard. Yep, it’s a couple months of uncomfortable. But the peace of mind and the.
Speaker 2 – 49:09
Structure and the clarity that you’re gonna.
Speaker 1 – 49:12
Have is, will get you years of your life back. Right. And then the third thing is just like a company philosophy that
we live by is like a good company, you know, you have to manage the paradox of like what’s in the best interest of
three things. And the first thing is what’s in the best interest of your clients that you serve, what’s in the best
interest of the company which needs to be around to serve those clients and then what’s in the best interest of the
team members? Because if you’re in a service based business, those team members are ultimately going to make
the company thrive, which make the clients thrive.
Speaker 1 – 49:43
So I believe this decision of having, being a steward of your business, doing a business valuation, even if you’re not
doing trust planning or settling, it’s still in my opinion crucial to get a business valuation. I get it done every year
and I’m not doing either of those things because it just gives me the confidence and structure to communicate
with the team members, you know, what their units are worth for a partnership. And also right confidence in
reinvesting and reinvesting in what is a concentrated asset for most people, the majority of their balance sheet.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
24 / 27
Speaker 2 – 50:15
So yeah, it’s, I mean we’re starting to get into a lot of theoretical, you know, business things. But you know, the
other part is involved in that is so you don’t leave your family a big mess.
Speaker 1 – 50:27
Yeah.
Speaker 2 – 50:29
And so that’s part of it as well. And, and then also, you know, the very best time, you know, to do something is when
everyone is happy and healthy and getting along and stuff like that. So. And you never know when that’s going to
happen. So you know, I think being planful and if you’re like, well I’m not going to sell for 10 years, great, let’s get
started today talking about it. Plan for it. Like, why would you not.
Speaker 1 – 50:58
You may be compounding a mess of how you run your business when you could adjust a couple things. And even
if 10 years from now, the business is worth two or three times more because of a couple adjustments that you
were able to advise the client of, hey, right, here’s some big issues the buyer’s gonna have. You can fix those slowly
now because you’re not gonna be able to fix them in the three months before you sell your business, so.
Speaker 2 – 51:19
Absolutely. And I’ve never worked with a client, whether it was to sell or to do evaluation or consulting or whatever,
where you go through that process and they’re not like, oh, I, I didn’t learn anything from that. They’re always blown
away at understanding, oh, that’s how private equity works. It’s not so evil. It’s different, you know, and it’s a
different mindset and everything, but it’s not actually evil. And then other times, like, oh, I, I, it lived up to the
stereotype. I would never do that. Yeah, you know, whatever.
Speaker 1 – 51:55
There’s good and bad actors in every industry.
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
25 / 27
Speaker 2 – 51:58
Oh, for sure. And I think the other thing is just, why would you not want to learn, you know, this, you know, if you
own a business, why would you not want to understand more about how, you know, the business is going to be
valued by the market, you know, the players out there, all those sort of things. And typically what we do for
someone that isn’t doing estate planning, you know, and they’re just want to get interested, we’ll go through and,
you know, we’ll do a evaluation model, but we’re not giving them a report as of a date. Yeah, you know, we’ll go
through and we’ll do a lot of analysis and do the recasting like we talked about and all those sorts of things.
Speaker 2 – 52:41
And then we just go over it with them, whether it’s PowerPoint or the Excel model itself, we go through it with them
so that they understand and we explain to them, hey, this is how private equity is going to look at this or the market
or X or Y, or even if you’re going to do an esop, like this is how the ESOP trustee is going to be looking at the
valuation and the things that are going to matter and not matter, blah, blah. Like how, like how is that not important
to understand that or helpful for you, like you said, to add value and all those things. So, you know, there’s, I think
there’s just the busyness of day of the, you know, it’s like in your world, why don’t people take advantage of the
401k match?
Speaker 1 – 53:28
Yeah, you know, simple business.
Speaker 2 – 53:30
They’re just kicking the can, you know, because they don’t care about retirement today, but they should.
Speaker 1 – 53:36
It’s a lot easier to build.
Speaker 2 – 53:38
Meeting Title: March EP1 Business Valuation (For
Transcription).m…
Meeting created at: 30th Apr, 2026 – 11:58 AM
26 / 27
Right?
Speaker 1 – 53:38
Yeah. Well, Tom, thanks for joining and everybody look forward to catch you next week. I think next week is the
exciting episode of, you know, how do you maximize the value of your business? So, Tom, thanks again.
Speaker 2 – 53:50
Looking forward to it.