In this episode we are joined by special guest Bharat Kanodia who has valuated trillions in assets from the Golden Gate Bridge to the New York State Thruway system and everything in between. Bharat explains strategies that can result in a valuation 10x greater than a competitor with the same revenue, same profit, same demographics by just making a slight adjustment to the business model!
Connect with Bharat Kanodia
Website: https://www.veristrat.com/
YouTube: https://www.youtube.com/channel/UCuhiC521jEtg-PLfFT_oKTQ
For detailed show notes, Justin Varuzzo's after thoughts on each episode, and lists you can use to take immediate action in your business, check out the website at http://www.marketingandservice.com.
In this episode we are joined by special guest Bharat Kanodia who has valuated trillions in assets from the Golden Gate Bridge to the New York State Thruway system and everything in between. Bharat explains strategies that can result in a valuation 10x greater than a competitor with the same revenue, same profit, same demographics by just making a slight adjustment to the business model!
Connect with Bharat Kanodia
Website: https://www.veristrat.com/
YouTube: https://www.youtube.com/channel/UCuhiC521jEtg-PLfFT_oKTQ
For detailed show notes, Justin Varuzzo's after thoughts on each episode, and lists you can use to take immediate action in your business, check out the website at http://www.marketingandservice.com.
Imagine for one moment, two identical businesses. These businesses have the exact same customers. They have the exact same revenue. They even have the exact same profit. How is it possible that one business could be valued@tentimesgreaterthantheotheronethatandmorecominguponthemarketingandservice.com podcast. Hey Justin, Bruzzo here from the marketing and service.com podcast. The podcast to help you build your business by creating incredible customer relationships. Today's show is all about valuations. And today we have an incredible guest. Who's going to be joining us to talk about how important valuations are and what little things can happen in your business that can have a tremendous impact on a valuation of your business. Now, you might wonder how this plays into the customer experience and building incredible customer relationships. But what if creating a great customer experience is the very thing that can boost your valuation while this doesn't apply to the 10 X that I introduced in this podcast, it is something that's covered. If you enjoy this, make sure you please subscribe, follow. And if you're feeling really good about it, leave a five star review. I'd greatly appreciate it. And it's what keeps me motivated and inspired to keep producing these podcast episodes. So I hope you enjoy this show and we're going to jump right into the interview on today's show. I have Barat candidate he's valued over 2000 businesses, real estate, industrial, governmental infrastructure, public and private companies. He's a appraise things and assets such as the golden gate bridge, Atlanta airport, Uber, Airbnb, Yahoo, the Brooklyn bridge, New York state thruway system. The Mirage casino in Las Vegas. And this list goes on and on Bharat signed off on over 4,500 valuations with trillions in assets globally. And today burrata is joining us over in San Francisco. How are you doing today? How are you doing Justin? Thanks for having me. Absolutely. My pleasure. Now I'm just going to jump right into this. You've got this fantastic YouTube channel called what it's worth, where you do videos on how you evaluate businesses. Can you tell me a little bit about that channel and how you got that started?
Speaker 2:Absolutely. It was, uh, frankly, um, you know, as I say, necessity is the mother of invention. Um, I needed something that, um, uh, makes me stand out. Um, and I have always enjoyed, um, as part of my job educating clients and my team members on valuations. And I have, um, uh, trained over 800 analysts and over 400 venture capital professionals and CFOs and partners. Wow. And the reason I am half good at it is because I don't do geek talk. Um, I mean, you know, I can go toe to toe with anybody on geek talk. Right? How does it help people? Right. If I start throwing fancy terms in front of you, you know, people think that's going to impress people, but no sure.
Speaker 1:Maybe, you know what, since you brought that up, maybe we can actually just talk about the word valuation, because honestly, I think a lot of people just quickly, when they think about it on the surface, they think, oh, you know, you're a startup tech company and in San Francisco and Silicon valley, and you're looking for that billion dollar valuation for your angel investor. Right. Uh, but I we've discussed this. There's so many other things that these valuations can apply to. Right?
Speaker 2:Oh, absolutely. I mean, uh, you know, generally traditionally when people think of valuations, it's for some kind of a transaction, right. Somebody is giving you money or you're taking money from someone, but there are many uses of valuation. It could be for tax purposes, right. Uncle Sam all was once his gut, how much to give him. Right. That depends on, or is for accounting. If you invested a hundred dollars in a company today, what's that going to be worth three months or six months or 12 months from now? Or it could be for insurance purposes when I appraise the golden gate bridge, that was when insurance, because how the underwriters know how much premium we charge. Well, that's based on a evaluation.
Speaker 1:Sure. That's great. Yeah. So it does apply to small businesses and medium sized businesses. Uh, and it's definitely something they want to think about. I imagine even something as simple as getting a loan, uh, if you want to expand for inventory or something like that would, it would be helpful to have a, a positive valuation on your, your organization.
Speaker 2:Yeah, absolutely. You approach a SBA or even a private lender for a loan and they would need to know what your business work before they give you the money. Sure.
Speaker 1:And one thing that, one of the videos that you have that I absolutely loved compared to identical car washes, uh, except one was valued six to 10 X, more than the other. Maybe you can talk a little bit about that because I really loved this one.
Speaker 2:Sure. This will actually be this happen to me practically. I, you, I go to this carwash, which is like two miles from my house and I always go there and they have this deal where they say, Hey, you buy five and you get one for free or you buy 10 and you get two for free, which is the hair cuts or the salon or something. And then one day I went and they had a huge line and I'm like, okay, I'm not going to stand here for a half hour. So I just drove a couple more blocks and there was another carwash which had more line, but then I was like, well, okay, fine. But you know, it seems like they've got a lot of bays and the cars were moving pretty fast. So I stood in line there when it was time for me to pay. She said, okay, so what's a membership number. Like what membership number of the carwash? And she's like, oh no, sir, we have these membership options. And then I looked at the membership options and it says, um, if you want two car washes, it's a$30 a month, three car washes,$40 a month. And five car washes,$50 a month. And I was like, man, that's beautiful business model because with the previous carwash say, if I buy 10 of them and then I have two for free, I have total 12, but I can get them over 12 months or even 18 months. There is no, um, uh, data exploration to that. And, and I only cut them a check once, right? Once in maybe two months, three months, six months. But the other carwash, I'm writing them a check or they're charging my card on a monthly basis. So respective of if I use it or I don't use it, they're getting my money. And valuation is all about business model. It's the same business, but their business model was far different. So as the evaluation person, as an appraiser, I would give this carwash the one with a monthly model, a higher multiple, because the, they, they have the ability to charge the customer's card on a monthly basis. Recurring revenue is the key to valuation. And that's why many of these companies like Salesforce or others are valued so high because they have a recurring monthly revenue model. Yeah.
Speaker 1:That, that I think is really important for a lot of small businesses to think about because it also, as you know, this podcast really is about how we can best serve customers. Uh, and I think in a lot of instances, it, of course doesn't apply to everything, but in a lot of instances, people want the convenience to be able to just go get a car wash whenever they want and not have to keep worrying, oh, do I have an extra token or die? I have the subscription. I can just go get my car wash. It's done. It's convenient. I don't have to think about it. I know it's going to be$30 a month, whether it's a Northeast winter where I'm watching salt off, or if it's a beautiful sun and I'm going once a month, it's just fixed in my budget. So I think it helps not only the consumer to budget for the product or service you're offering, but of course, as you said, you have that recurring revenue, which of course I'm sure is helpful for cashflow as well for a lot of businesses. Yeah.
Speaker 2:I mean, uh, banks or investors love this kind of business model because it gives you, um, insight into the future. There's stickiness there. Sure.
Speaker 1:One of the other things that I wanted to talk about a little bit is, uh, obviously you think valuations, a lot of people will think Instagram, right. Valued at a, you know, I think it was a billion dollars at the time without one penny of revenue, uh, when they got gobbled up by Facebook. And what I was interesting about this is, uh, on the surface, I thought to myself, well, why, uh, and then again, I brought it back to customer service and I thought to myself, well, here was a company that was delivering, uh, a really good service to their quote unquote customers, even though they weren't paying, but they were creating this really positive experience that attracted a tremendous number of people, which ultimately led to that valuation. Right. So I guess my question would be is what are in those instances where you have a huge audience, uh, or, or a large following, but you don't necessarily have a monetized product yet. Uh, how does that work with, uh, with the valuation?
Speaker 2:So even if Instagram did not have much revenue at that time, what they had were users and the users are building their empire, if you will, on Instagram's land. Gotcha. So I, for example, I have a YouTube channel, but I am building my empire on YouTube land that has value. Sure. Because the more people you add to the MIS mix, the morph, uh, influencers, the higher, the valuation of that land.
Speaker 1:That's great. That's a really good thing for people to keep in mind that it's not always about every single penny that you're bringing into that business at any given time. Right?
Speaker 3:Yeah. Yeah.
Speaker 1:So, uh, one of the other videos that caught my attention, uh, primarily because it was, it was something I discussed on a recent podcast episode. It was in regards to, uh, you were looking at some sign shops that create, uh, like signage that would go on buildings or the side of a van. Uh, and you were discussing about, uh, the possibility of collaborating with even competitors. Uh, tell me a little bit about how that works out.
Speaker 2:Many, a times people think of competitors as people you want to stay away from, right? But it's not necessary as, as, as, uh, Abraham Lincoln once said, if I make my enemy, my friend, am I not defeating him? Same way. Right? As, as a business, as a professional, you cannot possibly do everything and any good professional or any savvy businessman knows that if he tries to do everything, they know that's a recipe for failure. So instead of trying to do everything, try to focus on what you do the best and for everything else that you may not be the best at collaborate with people, even if it is a competition. Um, karma is a great thing. The more you give, the more you get the problem is people always start by saying, what do I get, right? No, it doesn't work like that. You give first, you give, once you give twice, you give twice, I give everybody three chances, right? If I can give anybody referrals, I will give them three times that referral and not expecting anything back. Right. But after the third referral, if I still don't get anything back and there's no date to exploration on this, if I still don't get anything back, I may say, Hey, maybe it's not the best collaborative relationship, but you want to involve your competitors. As long as you know, they're good people and they're not going to poach your clients or anything like that. It's always to your benefit, to work with people and work with people you want to work.
Speaker 1:I, I agree with the a hundred percent, I am a huge, huge proponent of those collaborations. Sometimes maybe it's not industry specific to your particular business. Uh, uh, you know, maybe you're a restaurant and you partner with a gift shop or something like that where there's cross promotion. Uh, but I think in a lot of instances, it's not a bad thing to reach out directly to competitors. And, you know, if you're in a landscape, whatever business you're in, you usually know who your competitors are and you should have a good understanding of what they're doing, right. And what they're doing wrong, and chances are, you would find something that, you know, they do better than you do. And you know, that there's a bunch of things that you do, that's better than what they do. Uh, so I think those collaborations really are super important. Uh, and one thing you had mentioned in that video that I thought was really fantastic is the idea that obviously in a lot of industries today, let's be honest, there's a lot of consolidation going on, right? So you've got buyouts, you've got mergers. Uh, and in that example, you discussed, Hey, you know, this company you're collaborating today, uh, you may be merged with a year from now or six months from now who knows, right?
Speaker 2:Yeah. You want to work with people because you never know where or how, or when you might see them again. And if you have, um, maintaining credit balance, the karma credit balance with them or their company, um, chances are when you do go around that 360 bend and come back to the same people via a merger or via an acquisition or another deal, they will think upon you favorably. And don't forget, even the clients will appreciate this about you because your clients will think that, Hey, Justin is just not looking out for himself. He's looking out for me. And he understood what I really needed. And he recognize that there are other people who can do a better job than him and he, me to them. And that will give Justin a higher rating in the credit scale to a customer. Um, instead of customers saying, oh, Justin couldn't do it. So I had to go find somebody else. Right.
Speaker 1:And, and this is, this is all about that building long term and solid relationships with your customers is something that I preach in every episode of my podcast. It's all about building trust and building long-term relationships. If you want fruitful business relationships that will last year after year after year after year. Most definitely. So something I thought was pretty cool that we had discussed briefly a few weeks ago was the, uh, the idea that you've represented both a lot of businesses, but you've also represented, uh, some of the VC firms as well. Right? Yes. Let me ask something that just out of curiosity, does anything change in your approach to valuing a business, whether you're on the business side or the VC side?
Speaker 2:Um, yes and no. Um, so it is all about perspective, right? So for example, this is a phone, right? It's this, you're looking at the backside of my phone.
Speaker 1:Borat's holding up his phone to the camera for those listening,
Speaker 2:Right. Uh, uh, Justin is looking at the backside of my phone. I'm looking at the front, somebody looking from the top, somebody looking from the side. Sure. It is the same phone. So when I'm doing evaluation for a venture capitalist versus a bank versus a founder, um, I am valuing the same object, but it really depends on the perspective. So the perspective changes the assumptions, um, may or may not be the same also. Um, say for example, if a VC is saying, oh, well, this company is going to grow at, um, a a hundred percent a year over year and may go up to 150% year over year. Versus if you look at the founder and hear her perspective, she might say, well, my company is going to grow at 200% this year and 500% next year. So yeah, the perspective is changing. Um, and because the perspective, the underlying assumptions that changing the evaluations may change as well.
Speaker 1:Okay. Interesting. That's really cool. I never really thought about that too much, but obviously if you're buying a business, you want to know what it's worth and if you're selling it, you want to know what it's worth. Uh, and, and of course you don't always find a happy middle ground in that
Speaker 2:Most definitely. Usually, I mean, you know, a buyer wants the lowest value and the seller wants the highest value and the right answer is somewhere in the middle. Right. Right. And, and just the people who are, um, uh, are, are good at empathy who are good at listening, who understand each other's perspective, they're the ones who are able to strike a deal, the ones who try to go just their way, it's hard to work with people like those. Sure,
Speaker 1:Absolutely. Absolutely. And, uh, as we start to wind this down a little bit, there's two questions that I always like to ask everyone who's on this show. Uh, and the first one is, uh, the biggest mistake that you've ever made that ended up being an incredible learning lesson, because I know myself a lot of, a lot of, uh, a lot of mistakes I've made have later become things that were really important learning lessons that have made me better at sales, better at marketing and, and better at business management. Uh, and a lot of people don't want to highlight their failures. They only want to highlight their successes. So I asked what's the biggest mistake you've made that you feel became later on a great learning lesson?
Speaker 2:Well, I've made many, many mistakes, but the one that stands out and that'll be very pertinent in, um, to, um, your audience is, um, Justin, I had spent a ton of money, um, in marketing my business, right. I had spent about$150,000 in marketing my business. I did everything. I blogs, SEO, PR conferences, sponsorship. I mean, you name it. I threw the kitchen sink at it and the results were marginal at best. Wow. The biggest learning was content is king and original video content is king of Kings. So after wasting all that time, money and effort, I said, okay, the heck with it. I am just going to double down on video content. And that's why I created my YouTube channel because using my YouTube channel, I get to reach out to different audience. I am helping people and it's coming back to me in terms of good karma, via SEO.
Speaker 1:That's great. That's a great perspective because I, I'm a huge proponent of video as well. Uh, and it's something that's been available and easy to do for the most part for so long, but yet people are still so reluctant, uh, and, and not comfortable behind the camera. And the one thing I always think about is, you know, back in the, well, you just did an episode on shark tank, right? And when, when you look at a show like that, people say, oh, if I could only get on TV and if I could just get my product in front of these people, uh, but the bottom line is you can, we have the tools, you've got the tool in your hand, right there. You got a phone, you've got YouTube, it's all free. You've already got it. You just have to do it and get out there. Right.
Speaker 2:Most definitely. And frankly, it was nerve wracking in the beginning. When I started doing videos, I'm like, oh my God, everybody's going to think I'm going off Hollywood and this and that. But no, that's not the point. Yeah. You know, as mark Twain said, the secret of getting ahead is getting started. So just get started, start somewhere. Yeah.
Speaker 1:That's great advice. I do think too, why you're sitting there for, oh, my is my shirt, is it, this is this Ray and you never watch a show and say, oh, that guy's shirts a little bit wrinkled. I don't know if I, I don't know if I can stand looking at this anymore. Right. So I just to go back for one second. So you did a lot of different marketing stuff. Uh, and, and in your experience, you found that video stood out above and beyond all the other subbies. You had mentioned you did a blog and stuff, and some SEO work as well. Uh, but the video is still trumped. The written word
Speaker 2:Video is like, um, uh, cat compared to handguns.
Speaker 1:That's awesome. Well, there you have it. That is a, that is a great piece of advice for anyone listening. Don't be shy, put yourself in front of the camera and do some videos. Uh, I, myself, I love doing videos and I've, I've found, uh, uh, I get pretty good exposure on YouTube with, with the videos that I make as well. Uh, so one of the other questions I always ask is what is the best piece of advice someone has ever given you? Uh, either personal or business, just some tidbit where you, you walked away and said, wow, this, this has a impact on my life, or this is going to change how I, how I run my business.
Speaker 2:You know, um, no person in particular stands out, but I've always been fan of, uh, two people. Um, one is Winston Churchill. And, um, the other one is, uh, mark Twain. And of course, Teddy Roosevelt, um, these three, uh, you know, I, I use their quotes quite a bit if you've ever noticed in my videos. And those quotes are not just filler. I'm
Speaker 1:More familiar with the Sopranos quotes in your videos.
Speaker 2:Um, but, but, but you know, what, what quotes are really it's poetry, poetry just shrunk down to one sentence, one and a half sentence. I mean, one of the, my, my favorite quotes from, um, Winston Churchill is, um, success is not final. Failure is not fatal. It's the courage to continue that counts.
Speaker 1:That's fantastic. That is great. I do like that a lot, and I think there's a lot, lot to be learned there and a lot to think about. So in terms of people finding you, because I'm sure people are going to want to get in touch and, and learn more about how they can have their business valuated. Uh, first and foremost, you got to check out what it's worth. That's the name of the YouTube channel for Bharat. And then of course, his website, which is verus strat.com, that's V E R I S T R a t.com. I'll also make sure that I put links both to the YouTube channel and the website in the show notes. And of course on marketing and service.com best way
Speaker 2:To reach me is via my website. Or if you go to the about page on the YouTube channel, there is an email you can reach out to me via email and know if you want to engage us great. If not, I'm just happy to give you advice. You know, I've helped a lot of people along the way and what I have seen as the more people I help, the better it is for me. So happy.
Speaker 1:Awesome. Any, any parting advice you can give to our audience for small? I always
Speaker 2:Think in terms of recurring revenue and automation, if you do those things, you will not go wrong. There
Speaker 1:It is. This is coming from Barat who has valued thousands of businesses worth trillions of dollars. Thank you so much for being here today. I really appreciate it. Thanks for having me. All right. Take care. Have a good one. Wow. What a great guest, what fantastic information and who really thought that there were so many reasons evaluation is so important for all businesses, big or small. If you're trying to get alone, if you're trying to build a collaboration, if you're looking for investors, this becomes so important. And I think the advice that Barack gave in this interview was absolutely spot on and fantastic, especially from a marketing perspective, his discussion of video and the success that he's gotten from his YouTube channel. That is definitely something you want to consider and see how you can integrate video into your business. Thank you so much for listening again. If you enjoyed this, please subscribe, follow. And if you want more information on how to get in touch with Bharat, you can always go to the website, marketing and service.com and look up this episode. I also put after show thoughts into those articles on the website. So it's definitely worth checking out if you enjoyed the interview and you're invited to come join the conversation on the marketing and service.com Facebook group. I love talking with like-minded individuals. Come join the group and share what you've got going on in your business. And maybe together we can overcome some of the challenges that you're facing. I'm your host. I'm Justin Bruzzo. This is the marketing and service at.com podcast. The podcast to help you grow your business by creating incredible customer relationships.
Speaker 3:[inaudible].