Get The Most Out Of Your Business

In this episode of the Making Bank podcast, we welcome Ryan Tansom who started his entrepreneurial career in his family’s business. They sold copiers, and Ryan worked as the executive vice president and grew the company to make 21 million dollars in revenue. Ryan is now the Co-Founder of Arkona; their mission is to help entrepreneurs develop the value of their companies through Value Growth Education and Strategic CFO Services. The idea is to help entrepreneurs shift their focus to long-term value creation rather than annual income.

Ryan talks about what it means to grow your business into a valuable asset. He dives into the difference between a lifestyle business and a valuable asset. He also explains how you can set up your business to be sold at maximum value in the future.

Listen to Josh and Ryan discuss growing long-term value:

(2:12) Ryan’s Background
Ryan first worked with his father selling copiers. When they first started, the company was losing almost a million dollars a day. They set their minds on growing the value of the business. Through rebranding, software automation, and managing their IT services, they managed to turn the company around in 6 years and make 21 million dollars in revenue. In 2014, they sold the company and paid off their debts and taxes, which set Ryan out on his entrepreneurial journey.

(4:56) Creating A Valuable Asset
Many business owners only focus on growing their top line and, in turn, think they’re growing the value of their company. Ryan breaks it down to shifting from a lifestyle business mindset to increasing your company’s value as an asset. Rather than optimizing for annual revenue, you should be concerned about your long-term revenue. Your company’s value is tied to how sustainable, predictable and transferable your cash flow is. However, it’s also important to remember that cash flow isn’t always directly correlated to revenue.

(8:22) Intrinsic Value and Strategic Transaction Value
When it comes to value, it’s essential to understand the intrinsic value, which is your company’s value based on the risk of cash flow, and then strategic transaction value, which is where a strategic buyer may pay a premium for the company. The intrinsic value of your company is vital because that’s the value that you can track. You’re able to measure your company’s value while you’re growing it based on the risk of cash flow.

(11:29) Cash Flow And Growth
The most important thing for anyone buying or selling a company is the long-term value of that company. Ryan talks about three financial statements that matter — your income statement, balance sheet, and cash flow statement. While many entrepreneurs ignore their cash flow statement, Ryan emphasizes the importance of the net cash flow provided by operating activities. That’s how much cash came into the business and how much is leftover. For anyone purchasing a company, the net operating cash flow is important because it allows them to figure out if the cash at the end of the month is growing or not.

(18:14) Selling Your Business
Ryan brings up the importance of having options. While many entrepreneurs enjoy what they’re doing and how they’re running their business, often, they don’t pay attention to giving themselves options for an exit. For business owners, it’s crucial to make money, but it’s even more important to grow the overall long-term value of your business. Think about the lifestyle you want and how your company is a part of that plan. You need to do things intentionally; you want to give yourself options that will help you achieve whatever your end goal may be.

(21:34) Making The Right Choice
Many entrepreneurs are miserable after selling their company because they sold without other options. These entrepreneurs aren’t happy because they haven’t sat down and figured out what they want from their company. That’s why long-term value creation is so important — rather than regretting what happens to your company later, decide what you want from your company, grow your company’s long-term value, and give yourself options for the future.

Links mentioned:
Arkona.io
Twitter: ryantansom
Instagram: ryan_tansom
LinkedIn: linkedin.com/in/ryan-tansom-4a440710/