Ep30: Kerri Salls – 3X Value Growth: Build Companies with Value

Kerri Salls, MBA, CVGA is a certified value growth advisor, author, and speaker. She works as a value growth advisor to underperforming and closely held businesses by helping them to revamp and improve operations for sustainability and scalability. 

Added to this, she is also a podcast show host of 3x Value Growth Podcast

In this episode, Kerri shares how she operates at the intersection of strategy, systems, and value growth to help middle-market companies multiply value three-fold in three years. Just as it is important to build a product with value, Kerri helps build companies with value.  

 

 

 

Why you have to check out today’s podcast:

  • Learn how pricing audit relates to growing a company’s value 
  • You will learn why there is a need to document processes to increase a company’s valuation 
  • Understanding the role of an exit strategist and value growth advisor in terms of the goals the company wants to achieve 

 

“What is value?  I am focused on the enterprise value itself-stand alone enterprise value-but where that comes from is your vision of value you want inside your company.”

-Kerri Salls

 

Topics Covered: 

  

01:45 – The difference between value growth and exit strategy, in term of growing a company’s worth 

03:00 – Skillset of  a value growth strategist and an exit strategist in terms of strengthening a business 

05:36 – What is value for a company and how do you judge the value strategy prior to the exit 

07:42 – How does  value relate to a market capitalization 

10:23 – Does increasing profit margin also doubles the value of the company? 

11:26 – How does documentation processes improves a company’s valuation 

13:31 – Common problems Kerri helps solve in companies she helped out 

16:19 – Difference among advisor, consultant, mentor and  coach 

17:39 – Thoughts of her being the ‘chief investigator of a company’ to look for what is broken and the red flags 

18:12 – How Kerri does her ‘value audit’, the places that usually had the red and yellow flags 

 

Key Takeaways: 

“The value on an outside basis just keeps rolling up and up and up. I’ve seen clients who start at eight and 9% who get to well above 20%. I have client stories that I do in my webinar wherein less than two years they are increasing the value of their business, 300 400, 500% just because we are giving them the structure and the foundation and we’re taking the owner out of the hot seat of being the gatekeeper for every one of those decisions. Now there’s a structure in place so they can indeed take that three-week vacation even without the cell phone.” – Kerri Salls  

 

“Every one of those elements that make you more understood as being like a public company because you’re so well managed–that increases value. That can’t be taken away from you, that they can’t whittle it down when you’re in a competition about pricing.”Kerri Salls 

 

Connect With Kerri Salls 

  

Connect with Mark Stiving   

 

 

Full Interview Transcript

(Note: This transcript was created using Temi, an AI transcription service.  Please forgive any transcription or grammatical errors.  We probably sounded better in real life.)

 

Kerri Salls: Every one of those elements that makes you more understood as being like a public company because you’re so well managed. That increases value. That can’t be taken away from you that they can’t whittle it down when you’re in a competition about pricing.

Mark Stiving: Welcome to Impact Pricing, the podcast where we discuss pricing, value and the sometimes tenuous relationship between them. I’m Mark Stiving, chief pricing educator at Impact Pricing, and today our guest is Kerri Salls. Here are three things you want to know about Kerri before we start. First, she is a value growth advisor. She advises CEOs on how to grow their business. We’re going to learn a lot about that, I hope. She is an exit strategist, helping owners of companies optimize their value before selling. I love that word value. And third, she has her own podcast called 3X value growth where she asks her high powered guests to answer seven questions in seven minutes and I just got to experience it. It was fun. Welcome, Kerri.

Kerri Salls: Oh, thank you, Mark, for having me. It’s really nice to be here and it was a pleasure having you because you, again, are our high power guest who brings great value to everyone. So glad you have this podcast too.
Mark Stiving: Oh, thank you so much. I appreciate it. So value growth advisor and exit strategist feel almost like the same thing to me. Is it? Or they’re different?

Kerri Salls: Not exactly. Because when you’re talking about an exit strategy, you’re focused entirely on the end game and a particular point in time and what those objectives are. When you’re talking about value growth, it can be anywhere along the continuum of the development and the life cycle of a business. Value growth is when you are consciously realizing it’s not just about the top line, but it’s about increasing the bottom line, value, strengths, sustainability, scalability of the business. Exit planning is with that particular objective and exploring what are the different exit alternatives and timelines and what’s going to be involved in achieving the end game that you have for the business as well as the value you want to walk away with,

Mark Stiving: So that makes sense in that I could see if I’m going to do an exit, we’re going to do a bunch of activities to get us to the exit, but if I just, and I shouldn’t say just if I want value growth, there could be a lot of different goals. It could be a lifestyle business. I want to increase the amount of profit I’m pulling out of the business to go spend and buy new airplanes or something like that and so that makes sense. Do you use a lot of the same skills in both of those?

Kerri Salls: Absolutely. To me, it’s the same skillset and is the same resources that I bring to bear with every client. It depends on their objectives and their vision of where they’re trying to take the company, whether it’s longterm or it’s in the next three to five years, what they need to set up so that they can transition to what comes next for them. It may be to a new business. It may be to retirement, but it may be two lifelong pursuits that they’ve never had time for. When you’re talking about value growth, it’s really about strengthening the business itself. You’re looking at what can we do internally? You’re not looking at the market at all. You’re just looking at what can we do to be the best at what we do too. As you talk about pricing is really focusing who’s our market, where’s our niche? Where’s the best opportunity for us? But again, it’s reducing the risks of doing that and implementing best practices so that you can excel in everything that you do and that is what will give you the foundation of sustainability and scalability, but combine all of that and now you’re in a position of strength, whether you need to go to the bank for financing, you are looking for outside investors to grow the business to the next level or indeed you’re looking for the most leverage in any liquidity event that you might pursue. It gives you that strength and foundation regardless of which path you’re taking and the biggest difference, for me, is that when we’re focusing on value growth anywhere along that business life cycle, you can include the entire team where when you’re doing exit planning, a CEO and one or two key executives with them are trying to build all of the same resources and make the same changes and document everything into best practices secretly behind closed doors, nights and weekends so that the team never knows what they’re planning an exit and doing it openly and transparently with the team versus behind their backs. There are a night and day difference in how you approach everything. I’m having more fun by being able to include the entire team.

Mark Stiving: Yeah. This is pretty fascinating. When I think about value for a product, I almost always go to what’s my customer willing to pay for this? When you think about value for a company, if we’re doing an exit strategy, then it’s how much can I get for the company? That’s easy, right? So what’s my buyer willing to pay for it? If we’re doing a value strategy prior to exit, so I just want a lifestyle business or there’s some other goal, how do I, how do I judge value? What is value?

Kerri Salls: How you judge it and what is value are two separate questions. What is value that I’m focused on is the enterprise value itself, standalone enterprise value, but where that comes from is your vision of where you want to take this company, not so much. Yes, it’s in terms of multiples of your cashflow, multiples of EBITDA, however, you look at value for your business, but it’s also all the other parameters that can be included in your vision that include all the areas of your business. Where do you want to take the business, the value of sales, the value of marketing, the value of operations or legal or even finance. What are you trying to achieve? What have you built? Where do you want to find value in all of those operational areas of your business to bring more value and excellence to the business itself that will help maximize the return on the bottom line? It can be increasing revenue, absolutely, by expanding channels, product lines, all of the things that you talk about and consider with pricing and packaging and market niching. In addition, is looking at how do we deliver that internally? What are our core values and mission statement that we’re aspiring to achieve in bringing more value to the bottom line? As soon as you start looking at all of these pieces, you should start seeing that margin, your profit margin ratcheting up. It’s not just going to go from 3% to 3.5% but you’ll start seeing increments of 10 and 20% increases on that margin, getting you to double digit profit margins and as soon as you get above 20% profit margin, your whole world changes. Something, I mean you know about all of these online systems like Dropbox or Zoom where these are companies that are really in a fast-growth mode and so their margins just keep expanding, but any business can start seeing stronger margins because they’ve thought through, where is the value? And as you talk about value in terms of pricing, it’s value in the marketplace that’s going to deliver value to the bottom line.

Mark Stiving: Is it fair to say, given the answer you just gave, when you think about value, you would almost always say market cap?

Mark Stiving: how’s the podcast going? Are you getting value? Research shows that people don’t really value what they get for free, but I’m hoping you’ll prove this research wrong. Please demonstrate to us and the entire world that you value this podcast. Would you please pause the podcast? Subscribe if you haven’t already done so. Rate the podcast and leave us a short review. You’d be doing a huge favor and research shows, if you invest this little bit of time, you’ll probably like the podcast even more. Win-Win! Pause. Do it now. We’ll wait for you.

Kerri Salls: Your market cap is critical when you’re trying to go to market to be able to command the premiums on that market cap and you want, ideally, to have what’s multiple people will be interested in paying for your business to based on that market cap, how many more multiples are they considering offering because they find value maybe somebody else doesn’t value or the integration with their current product line or the direction they’re taking their company. You are well aligned to just slide in and offer them great value instead of reinventing the wheel. What we’re doing intrinsically is giving you the foundation so that that market cap will be established at a much higher level because we take away the risk and so many elements that get lumped into goodwill when they’re doing that valuation externally, we’ve made them tangible instead of ethereal. There are so many things that people never document that they don’t put down their processes, that they don’t have contingency plans, nevermind written contingency plans. Those are the kinds of things that if you actually have them in a notebook, you can pull off the shelf or you have them in a cloud file. As soon as you have these things that they exist, you’re drastically reducing risk, you’re professionalizing more along the lines of public companies. Every one of those elements that makes you more understood as being like a public company because you’re so well managed. That increases value. That can’t be taken away from you, that they can’t whittle it down. When you’re in a competition about pricing, you’ve positioned yourself, whether you’re just strengthening the business for longterm value or you’re getting ready for some sort of opportunity, an acquisition, a merger, just straight liquidity, whatever it is for you.

Mark Stiving: So, so let me ask some, uh, some stupid hard questions. It seems obvious to me that if I could increase the margin for the sake of our, you know, let’s say we go from 10% margin to 20% margin, did we just double the value of the company at the same time?

Kerri Salls: We did more than doubled the value of the company.

Mark Stiving: Okay. And do you estimate these values for your clients?

Kerri Salls: I do it on intrinsic metrics within the company, not looking at the marketplace, so the way I look at value is a piece of what anyone on the outside is looking at for value to give you market cap, market opportunities and where to make the improvements to get the multiples you might be looking for or the increased value you want to command in the marketplace. Rather, I’m just keeping that out of my view out of my bias. I’m just trying to look at what’s going on internal in the company. What can we do internally, intrinsically to increase the value of this business?

Mark Stiving: So the next stupid hard question is you said that we could increase the value by documenting processes and looking more like a public company. Do you have any estimate of how much that improves the valuation of a company?

Kerri Salls: That’s one piece that will help you easily. That’s a core time-consuming piece that if you do that over two to three years that’s going to help to get you to triple the value because you’re documenting the business plan. You’re documenting the sales plan, you’re documenting the marketing plan, you’re documenting all your operations, you’re documenting your organizational structure and your job descriptions. You’re documenting standards and procedures everywhere. Not only is it documenting everything, but it’s laying it out in a format that is well understood and can be accessed by everyone and becomes repeatable by a brand new person coming into any of those roles. Therefore, you’ve made anyone being locked into their job unnecessary, needing all of those people as your being acquired, unnecessary. The value on an outside basis just keeps rolling up and up and up. I’ve seen clients who start at 8 and 9% who get to well above 20% I have client stories that I do in my webinar wherein less than two years they are increasing the value of their business, 300, 400, 500% just because we are giving them the structure and the foundation and we’re taking the owner out of the hot seat of being the gatekeeper for every one of those decisions. Now there’s a structure in place so they can indeed take that three-week vacation even without the cell phone.

Mark Stiving: So when you go in to talk to a company, what are some of the big problems that you deal with that you see?

Kerri Salls: Problems that I see. I see companies that have no structure. I see companies that have been doing things the same way for a decade and they don’t know what else they need to do except to tell their salespeople to go get more sales. And they don’t know what the problem is on the sales side, even though they, they might have a process and they have a script, but it turns out I had one client that the sales team, the sales were flat because they had not found a new client in five years. They were just coasting on repeat sales from the existing client base and the CEO didn’t know it. So that’s something where all you need to do is wake up your sales team or bring in another salesperson whose focus is all that new client acquisition. I’ve had an operational team that was losing all the orders as they came in the door. This was a $50 million company that the revenues were now half of that. I was brought in saying, find the problem than fix it because the plant manager had no clue. It turned out that all the orders coming in over the phone, half of them were being lost before they were even designed on the front end and the other half were being delayed on the back end, going through the print cycle in shipping. So…

Mark Stiving: Lost as in they were misplaced and never fulfilled?

Kerri Salls: Never fulfilled.

Mark Stiving: Wow.

Kerri Salls: Yeah. So they knew they had a problem. So rather than seeking out where the problem was and point blame because everyone that I was working with was afraid of losing their jobs in the next six months if we didn’t fix this. So we just turned the other cheek and started from scratch saying, what is the process? What should the process be and what tools do we need so that the jobs don’t get lost so that we can track step by step and who’s responsible. I was very, very blessed that their IT person is a junkie like me for what’s new and she had just signed up to be a Beta site for Oracle at that point and between the two of us we were having a field day creating a database to be able to track everything in, everything out so that we could keep track and then we taught the team how to do all of this, that they couldn’t touch a task until they signed it out and they couldn’t go onto anything else until they signed that one back in and then they could take the next one out. We eliminated lost jobs, we eliminated late jobs and the company again rebounded up to 50 million in revenue in less than a year. But it was diagnosing that and documenting it and training the entire team as to what was going on and what was needed.

Mark Stiving: Nice. What’s the difference between a value growth advisor and a consultant?

Kerri Salls: I’ve got this little crib sheet here. Cause a lot of people to ask me about a consultant versus adviser. Consultants and advisors are both at a high level of knowledge, but a consultant will actually do it for you very tactically. As an advisor, I can do it with you but at a strategic level and that it’s much more staying at that strategic level so that you own the tasks and the processes and indeed it becomes part of the company DNA. If I do it for you, you’ve never instilled those habits into your company and you’ll slide backward proven by too many clients doing it yourself a year later you say, oh, we don’t need to keep doing it that way and it’s, it’s a shortcut that people take. Whereas if you’re a coach and a mentor, those are both much more technical. At a lower level, the coach is going to get the answers out of you, assuming that you have all the answers. A mentor is someone who has been there, done that, is more strategic and will hold your hand as you try to get to that higher standard.

Mark Stiving: That was actually a really good answer. I like that. And so you are almost like the chief investigator. You come in and try to figure out what is broken and then we talk to people to say, okay, how, how can we go fix this?

Kerri Salls: Exactly! And I won’t say that it’s all in my head. It used to be that I would have to do this solo by myself, figuring out hands-on, but now I have tools that help me diagnose what exactly is going on, where are the red flags, where are we most at risk and what we can work on first, second and third that are going to have the most dramatic impact and give us the biggest bang for our buck, especially in the first six to 12 months so that we can see demonstrable change and improvement and strength in the company.

Mark Stiving: Yeah. I know in the pricing world we often do what we’ll call a pricing audit where someone will come in and ask a whole bunch of questions and survey a bunch of processes to try to figure out where the profit is leaking out of the company and then we say, okay, now let’s go work on these pieces. And it seems not too dissimilar. It’s just a matter of who does the work.

Kerri Salls: Yes, it is quite similar. We’re looking at all these eight areas within the company, the entire scope of your operation and saying where are the red flags and there’s usually at least one red flag in every area. There’s a lot of yellow flags in a lot of areas and the place that usually has the green flags is legal and finance usually is pretty close behind that they’re the most meticulous. Operations, they’re flying by the seat of their pants, so they don’t always have a lot of these pieces in place, but that’s limiting their growth and it’s limiting the leadership to be able to hand anything off because there are no tools to help with that handoff. There’s no way to groom people into the next role in their career path. In human resources, you can say that we interview and we have standards and we have a handbook for the company, but when you actually read it, it’s generic or it hasn’t been updated specifically to the company in five, 10 years. And when they look at that, it’s then why do we need to do that? That’s a lot of time. But if you look at the impact that’s having already on their team and the problems that are being caused, because that’s not clearly stated for everyone to understand and be on the same page, it’s causing challenges both in salaries. It can be reporting authority, it can be accountability, and therefore it’s every one of those factors is impacting results and performance for the company. So when you look at all these pieces, you start with understanding where are they trying to get to, then do an assessment to say, this is where you’re at. Consciously understand this is who you are today, but here’s your potential. This is where we can take it and align that with your vision of where you want to take it. And then we’re off to the races because we can actually then consciously,, constructively create the strategy to get there. And we’re including everyone. We’re not doing this in isolation. Sales aren’t off doing it on their own and operations is figuring out what they want to do on their own. In fact, you need to sign off from every department before your department plan can be approved. And when you have that kind of collaboration and cooperation, then when you start implementing, everybody’s on the same page and they know that everybody’s tied to the same core objectives for the company and if they go off on a rat hole tangent, that’s taking away from the company achieving these objectives, which everyone agreed primarily had a financial goal that everyone wanted to hit and there was something in it for them and their department by achieving that goal. So they’re shortchanging their own people immediately if they don’t buy-in and follow the plan.

Mark Stiving: Nice. So, Kerri, we’re going to have to wrap up here in just a second. But I always like to end with this question. We might modify it slightly for you, but I always ask, what’s one piece of pricing advice you could give our listeners that you think would have a big impact on their business? And if you want to take out the word pricing for you, that’s okay, but if you want to leave it in, that’d be even better.

Kerri Salls: In this comes out of consulting I did years ago where I was just focused on strategy, but it is a pricing piece because so many people were telling me, I can’t jump my prices that much. My current customers won’t pay that. But I’m saying, you don’t have to. The idea would be, and this is something I share with all my clients as a possibility, and we go through the exercise and it doesn’t work for everybody, but it does work for some, is that if your goal is to increase your prices 5% over the year or whatever it is, break that down into every invoice and if you’re going to be giving them 12 invoices, you’re going to take the 5% and break it down. That way. If you’re only in invoicing them quarterly, you break that 5% down quarterly and you increase their price for that quarter by what? 1.25%. Nobody’s gonna squawk at a price increase of 1.25 they can handle that and the next quarter you’re doing the same thing. Most people aren’t going to notice that you did in the quarter before and even if they did, it’s still not that much.

Mark Stiving: All Right, Kerrie, thank you so much for your time today. If anybody wants to contact you, how can they do that?

Kerri Salls: They can reach out to me directly at kerri@valuegrowthresults.com.

Mark Stiving: Perfect. All right, episode 30, all done. You know, when I was listening to Kerri talk, I kept thinking about how to build products with value and she’s thinking about how to build companies with value. That was pretty interesting. What were you thinking? Please let us know in the comments or wherever you download and listen. While you’re at it, would you please give us a five-star review? We would hugely appreciate it. And if you have any questions or comments about the podcast or about pricing in general, feel free to email me, mark@impactpricing.com. Now, go make an impact.

 

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