EP 18: Rod Burkert - How to Find the Right Appraiser for You?

Rod Burkert  3:02  

Hey, thanks for having me.

 

Ed Mysogland  3:04  

Oh, man, a long time coming. I've been looking forward to this interview for for some time, I wanted to start off the interview with I always get this question of how to find a good appraiser. And, you know, I think the older I get, and the wiser, I'm getting more selective in the engagements, I have enough experience to know when I have enough experience. So how do you find a good appraiser?

 

Rod Burkert  3:29  

When you say you I mean, I'm assuming or I'm imagining, you might mean from the perspective of say a business owner that needs an appraiser. Okay. So I would break that down into into three combat actually four components here, how do you find them? How do you evaluate them? How do you select them? And what makes them good? How do you know they're good? So yeah, how do you find them? Well, I think it's like any other product or service, you're likely going to start with an online search and you're going to Google, you know, business appraisers in Indianapolis, Indiana, for example, to find out at least who's in your neighborhood who's in your geographic area, if that's important to you. Another way that you're going to try and find someone is to ask for recommendations from friends or colleagues that may have gone through the business valuation process before. And I think the third way, the main way that you find somebody is maybe you saw them speak to or write for your industry organization, trade association, Chamber of Commerce kind of thing. And, and that's basically the way that I think you start your search, you know, start up there at the top of the funnel, and then you move on to well, how do we evaluate them? And I think you know, you once you find the person you go or their firm you go to the website And most importantly, on a website, I would say, do they have any case studies that showed how they solved problems like yours. Another thing that you can do to evaluate process, your prospect is to go to their LinkedIn profile and see what kind of recommendations that they have. And, you know, I wouldn't necessarily trust recommendations from fellow business appraisers, but do they have recommendations from, you know, someone who was clearly a client and said, hey, you know, rod or Edie, they, you know, they helped me sell my business, they did a great job, they were there every step of the way. You know, those are the kinds of recommendations that you're looking for. You can certainly talk to References, I mean, you can ask for a reference from a business appraiser, who, you know, if it's not apparent from their website, or their LinkedIn profile, you can ask them, you know, give me the name of one or two, or however many people you need to feel comfortable. And give them a call and say, Hey, what was it like working with Ed? Or what was it like working with Rod? How did they help you. And then the last piece is just finally selecting them, you know, and, again, they may come somebody may come highly recommended by those friends or colleagues that you talked to in the earlier step. When you do talk to the appraiser when you're interviewing them. And let's make it clear, you know, you should be interviewing them just like you would interview an attorney, or a banker or a CPA, we're all good. But are we the right fit? So when you talk to them, can they make this complicated subject of business valuation seem understandable to you? And finally, I think you're, you know, when it comes to selection, you are looking for things that show that they can do what they say they can do. So, you know, maybe they wrote a book on the subject, you've written a book, I've got it, you know, we've got a couple of friends in the business valuation industry that have written books related to transition planning, or Exit Planning, or gifting or whatever the need might be. And the very last thing would be that I would consider would be, do they have the requisite valuation credentials and certifications? I personally don't think a credential or certification will make a good appraiser. Great for you. But at least you know that if they have these certifications, or credentials, they went through some kind of minimum training to earn that credential.

 

Ed Mysogland  7:46  

I guess, like right from the get go on, on, you know, you Google and appraiser, and I am fighting more, and I'm certain you are to more and more people are those that are buying clicks and positioning? You know, it's not that it's, I don't have a problem with that's how you mark it. I guess I have a problem with that. It you just create more noise for the business owner. And it is just if you're not on the first page, for whatever reason. I mean, it's, I mean, you're not there, you know, and it's hard to to fight that battle.

 

Rod Burkert  8:25  

Right? That kind of information has made, you know, made that this job of finding anything online, both easier and harder, because there's more information. So there's more choices. But as you said, if you're not on the first page, you know, you're not going to look at all of the choices, just all the choices on the first page, which is, you know, why I think, you know, recommendations from, you know, other business owners that have gone through the evaluation process are really helpful. And, you know, again, it's why I think if you if a business owner is attending and an industry organization or a trade association meeting or goes to their monthly Chamber of Commerce presentations, and they see somebody showing up there, that speaks on the subject of valuation that addresses their problems. That's where you need to start. Yeah,

 

Ed Mysogland  9:21  

I agree. I mean, 80% of our practices is coming from, you know, belly to belly work, not just because Google says we're great, and a thing. So you coach business appraisers into designing ideal practices, and I've been a beneficiary of some of your coaching, when we talk about, and you talk a lot about niching down. So when does this work? And when does it or it's universal, and it does and that's who you need to appraise your company is somebody that's that in that industry, sleeping, eating and breathing it. So how do business owners know what's there? right niche for I mean, they know they understand their business, of course, but how do they know that? That that business appraiser and I think you alluded to it on the previous question, but how can they know

 

Rod Burkert  10:11  

that? Sure, well, I find it hard to imagine a situation where niching does not work. And there are two ways that, you know, you can that a business appraiser can niche their practice, they can be niched in a practice area. So, in this particular case, and given the purpose of your podcast, you know, you're going to be looking for someone who does Exit Planning, as it relates to potentially selling or transitioning a business, I have a coaching client, the only thing she does is act as a transaction advisor, she doesn't do valuation work for any other kind of deal or any other kind of transfer. She's not, you're not going to hire for her, you're not going to hire her for divorce purposes, you're not going to hire her for gift or estate tax purposes. What she has is a demonstrable track record in successfully selling businesses. And then the other the other piece of that head is, you know, specializing in a particular industry niche now, you know, come to the your business owners out there, are they in some kind of particular business? That's peculiar or particular? I mean, even from the standpoint of how revenue is recognized, you know, do you know is there certain accounting peculiarities that somebody needs to know about in order to successfully value a particular kind of company. So you might, you know, you, the business owner might be looking for someone that niches in the area of exit and transition planning, or exit or transition planning successfully. So selling businesses in a particular industry niche because of the nuances related to your industry that aren't very well known outside of that. So you can't have, you know, just as a silly example, maybe, but you can't have, you know, somebody that spends a lot of time valuing automobile dealerships are imagining that they're going to successfully value and sell a veterinary practice.

 

Ed Mysogland  12:31  

But it's funny you say that, I mean, because a lot of the appraisers that I talked to, it's like, well, earnings or earnings, and I'm like, yeah, that's, that's really not the case. And, you know, if that was the case, we wouldn't see such a disparity in multiples, and so on and so forth. But yeah, people and appraisers, both, I think they liked the idea of niching into into a practice, but I think that there's so much more, you know, I got to put food on the table kind of thing and let the business owner beware kind of situation. I don't I don't think I think it's a tremendous disservice to them. But but at the same time, I mean, you know, in our practice, you know, we we see a lot of different businesses, and we've got, you know, just by virtue of being around as long as we have we we've had, you know, opportunity and like you, I mean, we've had opportunities to see lots of different types of businesses. And so, you know, it's hard, you know, at the end of a transaction, when you know, that the disbelief that the business owner had at that time, is now turned to Yeah, I'm really sorry, I, I'm really sorry. I implied your incompetence. i And, and that's a good feeling. I'm certain you, you like it, too.

 

Rod Burkert  13:49  

Yeah. And I think at the end of the day, you know, there's two things that that your comments just made me think of number one, I think it's more important to have an a niche, whether it be a practice area or industry niche, if you are a you know, solo, or a one or two person valuation firm, because there's just no way that your your knowledge can span all the possibilities I could come to you. And I think specialization might be less of an issue, if you're engaging a firm and they have champions for different practice areas or industry niches that could help you out. But at the end of the day, I still think it comes back to you know, a business like you said, you know, business owner, beware, you have to determine their you know, they have to make sure that the person that they hire has a track record of solving their problem multiple times successfully. Yeah, that's interesting, you know, you know, you've got to do your homework and and I think one of the biggest thing things that I tell, you know, the practitioners that I work with is do you have, you know, two or three or four case studies on your website that somebody can identify with? And when they look at those case studies, and they immediately say, Rod is capable of solving the problem that I have, or rod is not, you know, but maybe I'll reach out to him because he might know somebody who is or I just need to continue searching.

 

Ed Mysogland  15:28  

Yeah, I'll tell you. And that's a that's a great point. Because I think early on in my career, I mean, I paid I paid some serious tuition for not knowing what I didn't know. And, and I'm, and I made that assumption. And, and I was fortunate that the guy on the other side was real generous with me and showed me the error of my ways. And I mean, he was eloquent, he added that he had an opportunity to just do some some serious reputational damage, and he didn't, but you know, he was probably 40 years my, my senior, so he had seen people like me before, and I think this was his first rodeo. No, no, not at all. But, but like I said, Boy, I wish it was easier to find those people because I think that the business owners that are coming coming in, again, they have a problem, but the problem is that they don't know the extent of the problem to search appropriately. You know, what I mean? And I think that's what you were saying before, all right, you find case studies, you google your industry, business valuation, and the problem is, you know, the, the search terms how to is now a real challenge in this valuation community of ours, because you know, all the do it yourselfers now, which leads me into my next question as these online calculators. And and you and I both have, you know, just a disdain for for commoditizing the industry, and you know, and good on them. Because, I mean, they're taking advantage of something that we should be doing. But this isn't going away. So I guess, if I'm a business owner, I mean, what makes me not want to say, alright, you know, I'll save the money. And I get, I get this number, and I get it in about, I don't know, 40 seconds after I fill out, you know, their questions. So what makes me want to do that?

 

Rod Burkert  17:23  

Yeah, I, you know, I, I've got some pros and cons. And I don't know if I have an answer. But let me just tell you what my thoughts are on what your question is. Because, you know, first of all, I don't there is no guarantee that a, you know, 10 or $15,000, professionally prepared report is going to produce a more accurate value than an online calculator. I mean, we hope it would, but who knows? Because, you know, our experience tells us that, you know, we go to litigation, because in the litigation a lot of times because to suppose it experts, and I'm putting air quotes around experts, have come up with a wildly divergent set of values. And that's why we're, you know, that's why we're in court. And, you know, so there is no guarantee that an online calculator won't produce a good result or a close result. And I think that is part of the problem, because the business owner many times, from what I've seen it, you can corroborate this or not, but many times I feel like the business owner is being guided by their trusted adviser, an attorney, a banker, a CPA, and they're saying, hey, you know, this online calculator is good enough that what you for what you need, it is good enough. So what's the business owner to do? You know, risk, you know, at one end of the spectrum, there is a free or near free solution. And at the other end of the spectrum, there's a 10 or $15,000 solution, it's their money, not ours. And, you know, are they are they willing to take the risk? Because they are, you know, they are risking their money they're being you know, the service may be recommended by somebody that they would otherwise trust. You know, that attorney, that banker, that CPA in any other situation. So, I think if there is a compelling argument for not going the online calculator route, which I don't think many people think of, but if you've got a problem, who do you call? You know, because it's online, it's like, it's like the whole of customer support that we sometimes feel like we've fallen into, like, if you get the result and you're like, you know, you're You're absolutely jumping through hoops because the value is so high, or you're dejected because the value is so low, who explains it to you, you know, whereas if you are hiring a real live business appraiser, they are going to be there after the report is delivered, they'll be happy to answer your questions, they'll be happy to tell you why the value is so high, or probably more often why the value is so low, and even more importantly, what you need to do to, you know, what were the value detractors that you need to fix between now in some future sale date. And I don't know how you get that kind of support from an online calculator.

 

Ed Mysogland  20:45  

Yeah, you know, and I'm with you, I don't know, if you saw the recent article on that Real Estate Appraisers are that you can have your up to, I think it's $400,000, they do not require an on site appraisal, as they used to, now they can use algorithms and such and use an online calculator for for lending purposes. And from a from a business appraisal standpoint, I mean, that's our, that's our leading indicator of what's coming down the path for appraisal as well as brokerage. So,

 

Rod Burkert  21:24  

well, my response to that, and I know exactly what you're talking about is when those real estate appraisals are being done. You have i My thought is that they're being done in the context of a portfolio. You know, if you're looking at, you know, 1020 100 properties, some of them may be high, some of the values may be low, but on average, the portfolio is okay. The problem is the business owner doesn't have a portfolio of businesses, he or she has one business, and that value has to be dead on or there's going to be a problem.

 

Ed Mysogland  22:06  

No, you're right. I don't know how much money you've made off of unwinding online calculator valuations when they they get into the sale. But I've helped a number of business owners understand what they purchased. Now everybody has to pay a little bit of tuition. And and I get it, and I understand why they did it. But as I've always termed it, we don't just provide a report. You know, in fact, we are we minimize the reporting. We do PowerPoints, we do presentation. So you know what, ask your questions, this is I can communicate a heck of a lot better in person, or online about your business and let you ask your questions as as we start. And then as we finish and the result and why. And I think that that's come from you, too. I think your your PowerPoint, pretty much everything that you're doing, unless a reports required, don't you?

 

Rod Burkert  23:00  

Correct? All right. What you're saying, though, maybe you've seen this ad, you know, there's a barber shop and a small town. And all of a sudden that competitor opens, you know, down the street across the street. And it's the big sign says $5 haircuts, and the original barber shop reacts by putting up a sign that says, We fix $5 haircuts. And, you know, again, I really have a lot of respect for many of these, you know, online valuation platforms. But you know, you're right. I mean, we can be in the business of fixing those of the those type of reports, those types of valuations.

 

Ed Mysogland  23:47  

Well, like I said, it's not going away. I mean, it's it's buyer, it's buyer beware, and that's okay. It's almost like not knowing what the nutritional aspects of the food you're eating are, you know, you just kind of get up can have something. And, you know, it says, you know, this is food, versus Here are the ingredients that made up your meal that you're getting ready to eat.

 

Rod Burkert  24:09  

And I know that, you know, our standard line is, hey, you know, you, you know, to the business owner, you've 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 entrust the valuation to, you know, a $500, or free online calculator? And let's not also forget that, you know, these online platforms, they're actually making inroads with the bankers. So there's, there's an incentive and possibly a conflict of interest. Although I've never heard this coming out yet, where the banker may be recommending an online valuation platform in which that banker or the bank Somehow benefits as opposed to recommending, you know, an independent third party business appraiser.

 

Ed Mysogland  25:09  

Oh, no, it's, it's it's happening a lot. I mean, so in through the exit planning world, I mean, we're seeing so many more sponsors, and some of these online platforms are showing up as a sponsor. So, you know, to working to start that conversation, and again, that ultimately, it's good from the standpoint of it starts the conversation. But the problem is that it's not what you think it is, in order to get you across the finish line. And and that's, that's my Rob. So we've talked a little bit about the crystal ball for the industry. I mean, what I think we can agree that it's not going away. But where does this end for us?

 

Rod Burkert  25:45  

Well, I think, my just my own personal opinion, I think there will always be some type of work, some type of valuation required for dispute work, including divorce work, I think there will necessarily be valuations for transactions and sales of individual businesses, because there's just so many so much money at stake, you know, it's hard for me to believe that the owner of a, you know, 20, or $50 million revenue business is going to put his or her hands in the fate of an online calculator. But you know, for, you know, for a few $100,000 revenue business, I mean, number one, I'd say, Sure, I get it. And number two, they're probably not our kind of client anyhow. But I do think that oh, and the third area that I think valuation of intellectual property, is going to be something that the the, the online calculators aren't going to be able to handle. But I, you know, I have a hard time believing from both a data availability and just the efficacy of doing the work that 10 years from now, we're going to be, you know, our industry is going to be doing business valuations for fair value for accounting purposes, or even gift and estate tax purposes. I mean, when you look at the process, it is so inefficient, it costs so much money, it takes so much time, that I think, you know, either data's you know, either big data is going to take away such a large part of this of this work, or the need for you know, the accounting, right, the accounting standards will change, and we won't be doing valuations for fair value anymore, the gift and estate tax will go away, or the exemption is going to be so high, that you know, very few of those businesses are going to need to be valued, but the ongoing dispute work, the ongoing transaction work, I think there's always going to be a need for experts in this area who are going to show up, help you with the value testify as to the value hold your hand through the valuation process. And you know, right now, maybe it's because of my age, I can't see us getting through that period without a live person.

 

Ed Mysogland  28:11  

I agree. So moving on to business value. I mean, what are the habits that a business owner must do to increase their business value?

 

Rod Burkert  28:18  

Well, I think Chris Mercer put a has a concept that was either in a book or he's written some blog posts about it. But you know, if you have a portfolio of of investment assets that you place with an asset manager, normally that asset manager charges one to 2% of the total assets under management to make sure and you happily pay that knowing that somebody is looking out for you. And what Chris Mercer proposes is that, you know, business owners spend one to 2% a year of their revenues, on things like making sure the Buy Sell agreement is updated. Make sure making sure your Human Resources policies are current, making sure that you're in compliance with all OSHA type regulations, again, depending on the kind of business that you have. And I think, ultimately, this comes down to two things, you know, working on your business instead of in your business. I know that that is a very trite expression, but very true. And I think, you know, don't be afraid to hire consultants that are smarter than you maximize the value the business before you have to sell it because there's always going to be somebody who knows something about your business that you know, they're going to be more of an expert in some aspect of your business that you are not. And I think the last thing you know, the other habit is you know, you have a retreat with yourself two or three times a year to check your navigation And in gold scape where you're headed, you know what's changed? I mean, so often, you know, there are business owners when we meet with them. They're busy, busy, busy, but they're always busy working in their business and not actually on it not not navigating it not thinking about what's the plan here? And then how long are we going to start to pull different triggers to position the business for sale?

 

Ed Mysogland  30:25  

Yeah, and I'm certain you've you've read James clear atomic habits. And, you know, just doing that one thing, and it doesn't have to be long but or take a lot of time. But just picking one thing and just start down that path, whether it's blocking 10 minutes, or even five minutes and just start there. So yeah, I'm with you. And I'm big on quarterly retreats I am, I had one, just this past Friday doing the same thing, kind of figuring out where this is heading and where we can add the greatest value. So talk about your practice. I mean, we've been talking about what's going on in the valuation community. But what are you doing? What What's your sweet spot? You know, Where Where are you going from here?

 

Rod Burkert  31:13  

Well, I've had, you know, I've been doing valuations in what I tell people in one way, shape or form since the mid to late 1980s. I've had my own practice since 2000. So I guess, you know, July of I just celebrated 19 years of being a solo practitioner. And my practice, almost from the beginning has been targeted towards tax purpose valuation. So gift and estate taxes, charitable contribution, S corp elections, primarily for manufacturers and distributors. And that's because part of my career was spent working for a fortune 500 specialty steel manufacturer. And I held some different positions in that fortune 500 company that allowed me to get out into the mill with a hardhat and steel tip shoes and see how the steel was produced and understand manufacturing lineups to putting together marketing plans for the product managers that actually had to sell the steel to ultimately working in the financial reporting area so that we could report the results of selling this deal. So, you know, I've always had a, you know, either a sweet spot or a weak spot for manufacturers and distributors, it's what I understand I know the lingo. Early on in my career, business owners would tell me that, you know, it was clear from the way that I talked to them that I really understood their business. I've never done Aesop's, I've never done health care. I've never done fair value for financial reporting, because, you know, I believe in my own philosophy of having a niche and sticking to it,

 

Ed Mysogland  32:59  

as these business owners are listening to you, I mean, are you taking on clients? Or what is your avatar look like? That would immediately you would recognize as a good fit, obviously, manufacturing,

 

Rod Burkert  33:10  

that's it. I mean, I really, that's my specialty. You know, I would love to be able to say, if you need me to help you sell your business, you know, but I would recommend you instead. I mean, that's not my, it's within my wheelhouse to help do that. But it's not my specialty. So for example, going back to one of our earlier questions about how do you pick somebody, you know, what's your problem? What are you trying to accomplish? Are you looking for an appraiser to just value the business and walk away? Do you want somebody to help with the negotiation, someone to help with the due diligence, someone that's going to, you know, like I said, negotiate terms and conditions actually take you to closing? That's not me, I'm, I'm going to be the person that that walks out the door after the valuation is done. I suspect somebody like you, and your firm is the whole soup to nuts from valuation to closing, that somebody could be looking for, you know, go back to that old Clint Eastwood movie. And you know, a man's got to know his limitations. And I know mine, and I've never been sued. And for malpractice and or errors and omissions of any kind, and part of that reasoning is is I stick to my knitting. And and I really enjoy the manual, you know, valuing the manufacturers and distributors and distributors.

 

Ed Mysogland  34:34  

Yeah. And you're certainly known throughout the community of just that, that niche and doing it that well. I want to be sensitive to your time. So my, my final question is that I think people would be shocked to learn that you've been traveling for nearly 10 years in an RV. And so you have a mobile consulting practice out there. So, so can you talk a little bit about What's it like? Living on the road? For all of us envious people?

 

Rod Burkert  35:05  

Yeah, I mean, clearly, it's not for everyone. I mean, people come up to me and say, I don't know how you can stand living in such a small space, you know, with your wife and your dogs. And I, I am now at the point where I look back and say, I don't understand how you can live in a house that doesn't go anywhere 12 months out of the year. You know, we follow the weather. I mean, that's primarily our goal. I mean, there's different places and things that we want to see. But it's all governed by weather. So, you know, in the winter time for the United States, we had south, and in the summer time we had north, and you know, you're traversing east and west as you go. And you see the different things and it works for us. I mean, I, you know, I will tell you that, you know, like you said, we've been doing it for almost 10 years, the available tools and technology are huge enablers, you know, even when we got started 10 years ago, internet was always a crapshoot, I mean, we might pull up in front of the most beautiful spot that you could ever imagine the point the RV, and to see a sunrise or a sunset, my immediate reaction was to pull up my cell phone and see how many bars of service that I had. Today, today, you don't do that anymore. I mean, you know, you can get internet almost everywhere. And, you know, recently I posted a picture of where we are. And you know, we are outside of hotsprings, South Dakota hotsprings is south of Custer, south of Rapid City, we're looking out on the most beautiful reservoir. And just out of out of sight of the photo that I took was a Verizon tower. You know, we're kind of we're kind of pretty far removed, it takes us an hour to drive up to the nearest big city, which is Rapid City, and we've got killer internet. And then you know, so for phone and for the computers, that's really the main thing that you need to be in AI for service business like mine. That's the main thing you need to have to be in business today. And you know, as the networks get more and more filled out, it's just easier and easier to do.

 

Ed Mysogland  37:21  

Yeah. Well, one of the one quote that that resonates with me, based on on what you just said, was that homes are graves for the living. And I don't know who said it, but I, I saw it and I wrote it down. I couldn't. And I can't remember whether it was Tim Ferriss or some one of those podcasts that I listened to that. They were saying that so yeah, man, I'm, I'm certainly envious of what you're doing.

 

Rod Burkert  37:50  

Yeah. And again, it's not for everyone, but what you know, it is what I tell people, it's our cup of tea. We imagined it into reality, but many people think, you know, they have what I call their RV equivalent of a cup of tea, you know, and what's holding them back from from doing that, because life is short, even if you're a business owner, you know, life is short, you can run a business from just about anywhere. If you have a goal or a dream that's not truly business related, how can you possibility Think yourself into doing both at the same time, right?

 

Ed Mysogland  38:28  

Well, like I said, I want to be sensitive to the time so so my final question is, so what's the best way we can connect with you?

 

Rod Burkert  38:35  

Yeah, so my, you know, my website is Rod burkert.com. And so the email is just rod at Rod burkard.com. And if you are a hanger out on LinkedIn, you'll also find me there. I'm really active on LinkedIn, so you can message me and you'll be sure to get a response. So email website and LinkedIn three best ways

 

Ed Mysogland  38:59  

got it. So I'll I'll make sure that we have links in the show notes to everywhere we were that you're hanging out, so it's easy to find you. So Ryan, thank you for being a defender of business value and being so generous with your time and experiences to help business owners maximize their value. I hope you'll come back soon and visit some more.

 

Rod Burkert  39:18  

I love that love to come back. You just let me know when or where and I'll make myself available

 

Ed Mysogland  39:24  

right on. Well, thanks so much and safe travels. All right. Take care and thank you.