Rod Burkert - Who is the right appraiser for you?
On today’s show, Ed is delighted to visit with Rod Burkert. Rod is Ed’s long-time friend. They have known each other for at least 20 years. Rod has been in the valuation community for so long, and everyone coming up through the valuation ranks would take his classes. He is one of those guys that is always at the forefront of what’s going on. He has written and contributed a number of articles on thought leadership.
The reason Ed asked Rod on is that his practice is changing a little bit. For the last nine years, Rod has been traveling in an RV as a mobile valuation practice. The other side of his practice is that he is coaching appraisers. Ed and Rod had been talking about appraisers. Questions like; what is an ideal appraiser, who is a good appraiser, how do I recognize one, where can I find him, is where Rod comes in. Rod, through his coaching practice, is identifying those people who are niching down. The best of the best in a particular industry.
2:20 – Who Is Rod Burkert
3:10 – How To Find A Good Appraiser
9:40 – Niching Down: When Does This Work And When Doesn’t
16:45 – The Challenge of “How To” Search Terms (Does Online Calculate)
25:34 – The Crystal Ball For The Industry Is Not Going Away But Where Does This End For Us
28:10 – Habits That Business Owner Must Do To Increase Business Value
31:00 – Rod’s Practice
34:40 – Living on The Road (Rod’s Mobile Consulting)
38:27 – Connect With Rod Burkert
Learn More From This Podcast
Who Is Rod Burkert
Rob has been a business valuation practitioner since the late 1980s. In July of 2000, he started Burkert Valuation Advisors in Philadelphia where he ran a traditional valuation practice for 10 years. Then in March 2010, he began traveling full time throughout the United States and Canada in an RV with his wife and dogs. Today he runs a mobile consulting firm that includes his valuation practice and coaching business – all of which he built by leveraging his professional network and social media, hiring virtual assistants, and making technology work for him.
How To Find A Good Appraiser
Rod broke down this process into four components: how do you find them, how do you evaluate them; how do you select them, and how do you know they’re good.
How do you find them? Just like any other product or service, you are likely going to start with an online search. Search online who is in your neighborhood or geographic area, if the location is important to you. Another way is to ask for recommendations from friends and colleagues that may have gone through the business valuation process before. The third way and the main way to find them is maybe you saw them speak to, or write for your industry organization, trade association, chamber of commerce kind of thing. That is basically the way that you start your search.
The thing about searching for appraisers online, however, is that some appraisers market themselves by buying clicks and positioning. This creates more noise for the business owner and makes searching for something online both easier and harder because there is more information and so there are more choices. If you are an appraiser and you are not on the first page of the search results then they will most likely not going to find you. This is why Rod thinks recommendations from other business owners that have gone through the business valuation is really helpful. And if the business owner sees someone who speaks on the subject of valuation that addresses their problem, then that’s where they need to start.
How do you evaluate them? Once you find the person, check their website for case studies that showed how they solved problems like yours. Another way to evaluate your prospect is to go to their LinkedIn profile and see what kind of recommendations they have. Do they have recommendations from someone who is clearly a client? Ask for references and talk to the references to get an idea of what it’s like to be working with that appraiser.
How do you select them? When you do talk to the appraiser, when you are interviewing them, check if they can make the complicated subject of business valuation seem understandable to you. Look for things that show that they can do what they say they can do. Maybe they have written a book on the subject and relayed it to whatever the need might be.
How do you know they’re good? Do they have the requisite valuation credentials and certifications? Rod personally doesn’t think that credentials and certifications will make a good appraiser great for you, but at least you know that if they have this certification or credential then they went to some kind of minimum training to earn that credential.
Niching Down: When Does It Work And When Does It Not
Rod finds it hard to imagine a situation where niching does not work. There are two ways that a business appraiser can niche their practice.
- They can be niched in a practice area. In this particular case, and given the purpose of this podcast, you will be looking for someone who does exit planning as it relates to potentially selling or transitioning the business. Rod has a coaching client whose only thing she does is act as a transaction advisor. She does not do valuation work for any other kind of deal or transfer. What she has is a demonstrable track record for successfully selling businesses.
- Specializing in a particular industry niche. Business owners out there that has a business that is particular or peculiar. Even from the standpoint of how revenue is recognized, is there a certain accounting peculiarity that somebody needs to know about in order to successfully value a particular kind of company. The business owner might be looking for someone that niches in the area of exit and/or transition planning, successfully selling businesses in a particular industry niche because of the nuances related to your industry that are not very well known outside of that. For example, you can’t have somebody that spends a lot of time valuing automobile dealerships imagine that they can successfully value and sell a veterinary practice.
It is more important to have a niche, whether it be a practice area or an industry niche if you are a solo or a one-or-two-person valuation firm because there is just no way that your knowledge can span all the possibilities that could come to you. Rod thinks specialization might be less of an issue if you are engaged in a firm and they have championed for different practice areas or industry niches that could help you out. But at the end of the day, business owners should beware. They have to make sure that the person they hired has a track record of solving their problem multiple times successfully.
The Challenge of “How To” Search Terms (Online Calculators)
The search terms “how-to” is now a real challenge in the valuation community. There are pros and cons in using online calculators, and here are Rod’s thoughts about it.
There is no guarantee that a $10,000 – $15,000 professionally prepared report is going to produce a more accurate value than an online calculator. Experience tells us that people go to litigation a lot of times because two supposed “experts” have come up with a widely-divergent set of values. There is no guarantee that an online calculator won’t produce a good result or close result. Many times, Rod feels like the business owner is being guided by a trusted adviser (e.g. lawyer, banker, CPA, etc.) who might refer him to an online calculator is good enough for what he needs. What should the business owner do? At one end of the spectrum, there is a free or near-free solution. And at the other end of the spectrum, there is a $10,000 or $15,000 solution. Are they willing to take the risk?
There is a compelling argument for not going the online calculator route (which Rod thinks not many people think of) and it’s this: If you have a problem, who do you call?
If you get the result and you are jumping through hoops because the value is too high or if you’re dejected because the value is too low, who explains it to you? Whereas if you are hiring a real live business appraiser, they are going to be there after the result is delivered. They will be happy to answer your questions. They will be happy to tell you why the value is so high or, probably more often, why the value is so low, and more importantly, what you need to do and the value detractors that you need to fix between now and some future sell date. You might not be able to get that kind of support from an online calculator.
To the business owner: you spent a ton of years building up what might very well be the most valuable asset that you have. At this point, do you want to trust the valuation to a $500 or free calculator?
Although Rod has not personally heard this coming out, some of these online platforms are actually making inroads with the bankers. There are an incentive and possible conflict of interest where the banker may be recommending an online valuation platform in which that banker or the bank somewhat benefits as opposed to recommending an independent 3rd party business appraiser. Ed, however, saw this happening a lot in the exit planning world. A lot of online platforms are showing up as sponsors. Ultimately, it’s good from the standpoint of it starts the conversation, but the problem is that it’s now what you think it is in order to get you across the finish line.
The Crystal Ball For The Industry Is Not Going Away, But Where Does This End For Us
In Rod’s personal opinion, there will always be some type of valuation required for dispute work including divorce work. Rod thinks there would necessarily be valuations for transactions like the sale of individual businesses because there is so much money at stake. It’s hard for Rod to believe that an owner of a $20M-or-$50M-revenue business is going to put his or her fate in an online calculator. But for a few-hundred-dollar-revenue business that is understandable.
The valuation of intellectual property is going to be something that the online calculators are not going to be able to handle. Rod has a hard time believing from both data availability and the efficacy of doing the work that 10 years from now our industry will be doing business valuations for fair value for accounting purposes. Or even gift in a state tax purposes. If you look at the process, it is so inefficient, it costs so much money, it takes so much time that Rod thinks either big data such a large part of this work or the accounting standards will change that we won’t be doing valuations for fair value anymore, or the gift for the estate tax will go away, or the exemption will be so high that very few of those businesses will need to be valued. But with the ongoing dispute work, the ongoing transactional work, there is always a need for experts in this area who are going to show up and help you with the value, testifies to the value, and holds your hand through the valuation process.
Habits That Business Owner Must Do To Increase Business Value
Chris Mercer has a concept, that was either in a book or on his blog post, that is if you have a portfolio of investment assets that you placed with an asset manager, normally that asset manager will charge 1%-2% of the total assets under management and you happily pay that knowing that somebody is looking out for you. What Chris Mercer proposes is that business owner spends 1%-2% a year of their revenues on things like making sure the buy-sell agreement is updated, making sure your human resources policies are current, making sure that you are in compliance with all of OCIO type regulations depending on the kind of business that you have. Ultimately this comes down to two things; working ON your business instead of IN your business. Don’t be afraid to hire consultants that are smarter than you to maximize the value of your business before you sell it because there is always going to be somebody who is an expert in some aspect of your business that you are not.
The other habit is to have a retreat with yourself two or three times a year. Check your navigation and goalscape where you’re headed. It’s so often that business owners are busy working IN their business and not actually ON it, not navigating it, not thinking about what’s the plan here and then how are we going to start pulling the triggers to position the business for sale.
Rod had been doing valuations since the mid to late 1980s. He had his own practice in 2000 and he just celebrated 19 years as a solo practitioner. Rod’s practice, almost from the beginning, has been targeted towards tax purpose valuations (gift and estate taxes, charitable contributions, S corporation elections) primarily for manufacturers and distributors. And that’s because part of his career was working for Fortune 500 company steel manufacturer. He held different positions in that Fortune 500 company that allowed him to get out into the mill with a hard hat with steel tip shoes and see how the steel is produced and understand manufacturing lineups to put together marketing plans for the product managers who actually had to sell the steel to ultimately working in the financial reporting area so that they can report the results of selling the steel.
Rod has always had a sweet spot or weak spot for manufacturers and distributors. Early on in his career business owners would tell him that it was clear from the way he talks to them that he really understood their business.
Rod has never done ESOP. He has never done healthcare. He has never done fair value for financial reporting. That’s because he believes in his philosophy of having a niche and sticking to it.
Living on The Road (Rod’s Mobile Consulting)
Living on the road is not for everyone. People come up to Rod and say, “I don’t know how you can stand living in such a small space with your wife and your dogs”, and Rod is now at the point where he can look back and say, “I don’t understand how you can live in a house that doesn’t go anywhere 12 months out of a year.”
Rod, his wife, and their dogs follow the weather. There are different places and things they want to see but it was all governed by the weather. In the wintertime for the United States, they head south, and in the summertime they head north, traversing east and west as they go.
The available tools and technology are huge enablers. When they started 10 years ago, the Internet has always been a crapshoot. They might pull up in front of the most beautiful spot that you could ever imagine, Rod’s immediate reaction is to pull up his cellphone and see how many bars of service is available. Today, they don’t do that anymore. You can get Internet almost everywhere. And for a service business like Rod’s Internet is the main thing he needs to stay in business today.
Living on the road is not for everyone but it’s Rod’s and his wife’s cup of tea. They imagined it to reality.
Connect With Rod Burkert
Three best ways to connect with Rod:
Website – https://rodburkert.com/
Email – firstname.lastname@example.org
LinkedIn – https://www.linkedin.com/in/rodburkert/