Entrepreneurship Podcast post

Driving Business Value with Ken Sanginario

George Grombacher April 28, 2022

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Driving Business Value with Ken Sanginario

LifeBlood: We talked about driving business value, how and why businesses at every stage should be thinking about it, the key areas to pay attention to, and the right questions to ask, with Ken Sanginario, business strategist, value creator and founder of Corporate Value Metrics.  

Listen to learn why the value of your company is within your contro!

You can learn more about Ken at CorporateValue.net and LinkedIn.

Thanks, as always for listening!  If you got some value and enjoyed the show, please leave us a review wherever you listen and subscribe as well. 

You can learn more about us at LifeBlood.Live, Twitter, LinkedIn, Instagram, YouTube and Facebook or you’d like to be a guest on the show, contact us at contact@LifeBlood.Live. 

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Our Guests

George Grombacher

Ken Sanginario

Episode Transcript

george grombacher 0:00
Come on one level this is George G. And the time is right look at today’s guest strong and powerful Ken Centenario. Ken, are you ready to do this?

Ken Sanginario 0:19
I’m ready, George always ready. Let’s go.

george grombacher 0:21
Let’s go. Kenny is a business strategist, a value creator, an educator, an industry pioneer. He’s the founder of corporate value metrics, a web based platform, helping to strengthen companies, prepare them for innovative growth, and maximize their long term value. can tell us a little about your personal life some more about your work and why you do what you do?

Ken Sanginario 0:41
Sure, George. Yeah, thanks for having me. And I have been able to develop a system and a process over the last dozen years or so that is a proven way to help companies to double or triple their business values over a three to five year period. And that was based on having spent 18 years turning around underperforming and distressed companies, often six to 18 months at a time deep dive, take them over as interim CEO or chief restructuring officer develop and execute a turnaround strategy, and then recapitalize them or sell them on the back end. And often, but not always in crisis situations where companies may not even know how they’re going to cover payroll the following weekend, I did this on behalf of private equity firms and bank workout groups and sometimes the business owners themselves. But what I realized in those 18 years, and what I learned was how to very quickly and efficiently be able to identify the strengths and weaknesses, the constraints, the potential fail points in companies that were depressing value, and constraining the company’s growth opportunities. And very often, companies that slipped into distress were companies that were fast growing, they were entrepreneurial kind of companies, very fast growing, they had great products or services they knew how to sell, but they didn’t know how to build an infrastructure around them to support the growth effectively. And they ended up putting pressure putting more and more pressure on the weak points of a company. And just like a chain being only as strong as the weakest link. At some point, those weak links when the company continues to grow, those weak links become fail points. And so what I learned over the the those 18 years was how to identify where those weak points are, and which ones are most important to be fixed, kind of in what sequence and what level of intensity and so forth, and be able to do that proactively in a planning process rather than waiting until there’s a real problem that could take the company down. And that was great knowledge to learn. And I realized that there was a whole knowledge base that was sort of not being provided to company owners as they were growing their companies. And I decided to codify that that knowledge base that didn’t exist really anywhere. And to put it into a software platform that could make it easy for entrepreneurs, business owners, business advisors to be able to diagnose where those strengths and weaknesses are, and how to address them and prepare the company for growth. And then because I also got involved in a lot of m&a and business valuations during those 18 years, in those engagements, I could build in a valuation module into this whole system and process so that we can show a business owner and this is all a proven system. It’s been out in the market now for seven years. And it’s used all around the country by a lot of different large and small advisory firms of all different types. But it’s so it’s a proven system to show in advance of entrepreneurs or business owners investing in any part of their companies that can show them what the impact would be on the value creation aspect of their business. So it can make them much more focused and much more disciplined and how they’re growing their companies. So that’s what I do. My whole mission is to create create value and impart knowledge that I think was has been really sorely missing in the in the entrepreneurial world for a long, long time.

george grombacher 4:41
Amen. That that’s something that we all want to know is does this work? Is this going to work? And you could say that, yes, this this will work?

Ken Sanginario 4:51
Absolutely. been proven hundreds of and hundreds and hundreds of cases around the country by a lot of different large hands. Small advisory firms, national firms and all the way down to smaller firms and business owners. Now, recently, we’ve made this available to business owners directly. And we’re finding that we started off as just kind of as a beta test. But we’re finding that business owners are very capable of going through this diagnostic process themselves. And then they can either implement the what comes out of the, it’s a roadmap that comes out of the process, they can either implement that themselves, or they can reach out to us or to any of our practitioners around the country. We train and certify practitioners of this system all around the country. So we have lots of people that do this now, and follow the system. But they can reach out to us if they have any particular expertise that they need or resources that they need. And so it just it makes it, it makes it really easy for business owners to get the kind of help that they that they need to grow their companies.

george grombacher 6:06
Nice. Well, I appreciate that. Are there for lack of a better term, like pillars or key areas like leadership, team culture, human resources?

Ken Sanginario 6:18
Yeah, great question. So we have eight primary functional categories that we believe are the eight primary categories that every company has to have fully developed, fully functioning, and very importantly, imbalanced with each other in order to reach peak performance and, and create maximum value. And they are planning, leadership, sales, marketing, people, operations, finance and legal. And there’s science behind those eight categories. But those are the eight categories that we look at. And we then subdivide them into almost 50 other smaller subcategories. And then we we go through a diagnostic process that is largely a self diagnostic by the leadership team of the company, just by asking the right questions. And that’s what I learned in my turn around 18 years of turnarounds is how do you what questions do you ask how do you how do you get to the root problems are the root constraints in a company very quickly and efficiently. So it doesn’t take years to figure out where the problems are going to occur? We can we can tell within a day where the problems are likely to occur, and what point of growth and how to fix them and all of that. So those are that’s how we that’s how we view it. It’s a very structured, methodical process,

george grombacher 7:48
nice thinking you’re probably walk into some companies, and it’s glaringly obvious right away to you what some of the problems are. Because when you say, can I see everything in your legal department, they’ll just say, I don’t know what you’re talking about, or whatever it might be. But then certainly, there are probably more established companies that have something going on in each one of those eight core areas. So you need to be able to drill down and recognize, because making these diagnoses and triaging and figuring out what to prioritize, you want to do that faster, rather than slower.

Ken Sanginario 8:29
Now, that’s, that is absolutely right. I mean, we go through these individual subcategories. And usually the first one or two questions in a subcategory kind of identifies right away whether the company has anything in place in this subcategory. And and then if not, we can we quickly move on. If they think that they do, then we ask some deeper, more probing questions about how well developed, the company is against best practice standards. And that’s, that’s the whole measuring stick is we use best practice standards, by functional category and by industry and so forth, to be able to understand how well developed the company is against those best practice standards. And if you think about it, it’s if you think about how much more valuable say a public company is versus a private company, public companies are typically three to five times more valuable than a comparable private company. And it’s all because of the underlying quality quality across the entire public company across the whole enterprise. And it’s because they have all of these outside independent entities looking over their shoulders to make sure they have they have investors, they have stock analysts and bond analysts and the SEC and auditors and independent boards of directors, they have all these groups that make sure that the companies are fully developed and fully functioning private Companies don’t have any of that outside expertise or outside oversight. And not that they need people looking over their shoulders, but they don’t get the knowledge that public companies get. And we don’t suggest that private companies have to operate like a like as though they’re a public company. But to move them closer to that level of development and quality over time, significantly reduces the risk of the companies and therefore increases the value. And that’s how we measure it. It’s all based on the valuation methodology.

george grombacher 10:33
Yeah, it certainly does make sense, as you’re sort of explaining that what popped into my head is, there are certainly a lot of hurdles and a lot of work to be done to take a private company public. And so that means you’re just legally obligated to think about and have conversations probably in each one of those eight areas, or at least the key ones.

Ken Sanginario 10:54
Yeah, and we, again, we don’t suggest the companies try to go public, I think these days, you have to be so big to go public. But to just understand what it would take to move the company over time, this is not a quick fix, this isn’t something that we you know, you work on your company for a couple months, and you’re done. And then you and then suddenly, you’re you know, much higher valued company, this is a it’s sort of a lifestyle change and how business owners think about operating their companies in the future. It’s a disciplined system, a disciplined process, and it brings focus and efficiency to them and helps align their entire organizations from top to bottom, get everybody rowing in the same direction, eliminate all the unnecessary work, focus the company on the big overarching objectives that they would like to achieve and say, look out for five years down the road, and it keeps the company, you know, sort of on a very focused track, to move the needle for the company. And it doesn’t matter if the company ever wants to sell, maybe they want to sell in the future, maybe they want to give it to their kids, maybe they want to sell it to the management team, or put it in nice or whatever, there are all sorts of options. But no matter what their their aspirations are, if they run their companies at peak performance, they will be they will be ready for any opportunities that might come their way in the future, whether they expect them or not, or plan them plan for them or not, they’ll be ready at at the right, you know, at any point in time to entertain opportunities, maybe for growth, maybe for acquisition may be for sale, what have you. And so, and they certainly will be more profitable. By doing so. And its profit, I think what a lot of business owners don’t understand is that the value of their companies is in their control. They can manufacture value, just like you can manufacture a widget, you have to you have to design an engineer a process. It has, you know, certain ingredients of resources that you need, it needs focus and discipline, then you measure the outputs, and you recalibrate and you end up going through a process. And once it’s finely tuned, now you have a process for essentially creating value in the company. And if you stick to that, over several years, that’s how you double and triple the value of the company. And most owners don’t understand that they think that top line growth and bottom line profits, growth and profits. That’s what drives value. And that’s a huge mistake they make or misunderstanding that they have because top and bottom line growth in a company is a byproduct. It’s not a driver unto itself. And very often top line growth and bottom line growth. Not only do they not create value, they might actually erode value for a whole host of different reasons. Maybe the organizational structure is getting more and more stressed by that growth. Maybe they’re chasing revenue, maybe they’re underpricing their products or services in order to win business. Maybe they taking on contracts that are too big for them to handle or outside of their core competency. All of these reasons can actually erode value, but if they have a disciplined process and focus on the right areas, the focus on the underlining the the underpinning qualitative factors in their companies, then the right kind of top and bottom line growth will happen as a byproduct and that’s what creates the value. It’s not chasing those as drivers unto themselves.

george grombacher 14:53
That makes a ton of sense. And that’s I think that’s a really really powerful that the the value of your business that is within Your control? Absolutely, even though probably a lot of people don’t feel like that on a day to day basis, but it’s the reality. And you said a lot of really important, and I think powerful things there that if somebody says, Well, I don’t need to do that I’m just going to, you know, pass my business along to my kids, I would almost think that you need to engage in this more. Because Nick, we’re all aware of the statistics of businesses fail to successfully transition from generation to the next because maybe your kids aren’t going to have the skin in the game that that that that the matriarch, the patriarch had it certainly they’re not if they’re not buying it from you. So I can see this being so much. Just as as important certainly.

Ken Sanginario 15:41
Yeah, absolutely. I mean, kid, especially the younger generation these days, they don’t want to inherit a bag of, you know, a bag of dog poop that they have to, you know, work on for the next 20 years to get it back to health. They just won’t, they just won’t take it, they don’t, they won’t buy it, they won’t even take it if it’s given to them. In a lot of cases these days. That’s what we find with a lot of business owners. We ask them, What about your children, they say, Oh, my, no, they have no interest in taking over in this business. They want to go do their own thing. They have their own interests, and so forth. Now, if it’s a very healthy company, strong, healthy growing company, it may be a different story for their children, if they can take that take over that and focus on growing it rather than fixing it. They don’t want to, they don’t want to take a sick company and try to nurse it. They want they want a company that they can step on the gas pedal and grow. And so yeah, it’s very important for for business owners who aspire to their kids taking over the business. That’s a great aspiration to have a family business that’s multi generational. But you’re right, the statistics are pretty dismal. And it’s because companies are not ready, the the, the, the parents don’t, they don’t position the company properly for their kids to take it over. They just, you know, they run it for 40 years, and they want their kids to be all excited about it. It just doesn’t happen that way.

george grombacher 17:13
No, it does not. How long did it take you to to develop? I know that it’s a lifetime of knowledge and information. But how long did it actually take you once you decided to create this program.

Ken Sanginario 17:25
So I thought it was going to take about a year and cost about like, you know, maybe $25,000 to create the software platform. But it ended up taking five years, and costs many hundreds of 1000s of dollars. And so took it took a year just to create a prototype and then a second year to sort of calibrate it back tested on in house files that my partners and I had at the time and make sure the calibration was right on the valuation module and so forth. And then a third year to feel tested where we took about 25 companies through it, and made sure that it was all everything was working properly. And then two more years to get it rebuilt in the cloud as a SaaS platform. So it ended up being a five year process, it’s now been in the market for seven years. And in those seven years, we’ve had, I think, seven new releases of the software. And knock on wood, all of the all of the original algorithms were rock solid, none of those had to change. All the releases, were adding new features, new functionality, new industry additions, new tiers of the software for different sizes of companies. So now we have sort of a light tier for companies that are let’s say below 5 million in revenue, then we have a middle tier and an upper tier. So it can handle companies anywhere from you know, say a million in revenue, all the way up to you know, a couple 100 million in revenue and just using different tiers. And so yeah, it’s been a it’s been a labor of love. And I was never a software I’m not a software developer. So for me it was a my expertise is in the knowledge base and building in the knowledge base and architecting the framework and all that and then of course I have to rely on the the best experts in the world to build the build the software platform for me and do all the coding.

george grombacher 19:29
Does it always take longer than then than we expect?

Ken Sanginario 19:34
Yeah, for sure. I know I think looking back I think okay, if I ever knew it was going to take that long and cost that much. If I knew that in advance, I may not have actually done it but in retrospect once your hip deep in it, it’s you know, you just you go and and I look back now and I’m very proud of what we’ve created and glad that I certainly glad that I did it. And I think, as opposed to me, in deploying my knowledge and expertise on the few companies that I can touch each year, this is a way for this knowledge to be out in the, you know, sort of public domain and have a touch, hopefully 10s of 1000s of companies in the coming years. Because I think it’s knowledge that has been sorely missed. Business owners don’t know it. It kind of combines the turnaround knowledge base with the m&a knowledge base and valuation knowledge base, all of these knowledge bases exist, sort of individually, discreetly, but nobody’s ever combined with them. And that’s, that’s kind of the magic of the software is that brings those all together, and has them interface with each other in a very effective way. Very easy to use way, you don’t have to be an expert, you just follow the script, you just sort of follow along, and it leads you down the right path. And that’s the power of it.

george grombacher 21:06
Love it. Well, Ken, thank you so much for coming on. Where can people learn more about you? How can they engage with you? How can they take advantage of the software?

Ken Sanginario 21:17
Sure, thanks. Thanks for having me again, and our website is corporate value.net. And that’s probably the easiest place for people to go and check us out. There is a there is a special section there for business owners. So when they first log on, it might you know, they might say hey, this is for business advisors, which it is but we have a special section for business owners as well. So if they can click on the, the correct section of the website for their interests, and then they can reach out to us My email is on the website, they can reach out to us directly, but my email is the letter K. And then my last name, sa n g i n A Ri o at corporate value dotnet. And my phone number is there as well so they can reach out to me by email by phone or just click on one of the links in the website to get more information we we’d love to talk to them.

george grombacher 22:22
Excellent. Well, if you enjoyed this as much as I did, so can your appreciation and share today’s show with a friend who also appreciates good ideas go to corporate value dotnet and whether you are an entrepreneur or a professional advisor, there’s a section on this on the website for you send can an email or get in contact however you’re comfortable. Again, corporate value that net Thanks, Ken. Ken. Thanks, George. And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai

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