From Daily Profit to Long-Term Business Value [RR 1109]

SPEAKER_1 (0:01)

This is The Automotive Repair Podcast Network.

Carm Capriotto (0:06)

Hey, everybody. Carm Capriotto. Oh my God. It's Coach Chris Cotton. Hi, Chris.

Chris Cotton (0:12)

Hello, everybody. Hello, Carm.

Carm Capriotto (0:14)

Hey, Chris. So glad you're here. It's Coffee with Carm and a Coach on Remarkable Results Radio. I got to tell you, just a few days ago from this recording, Chris has one of his best episodes that I've heard in a long, long time. Of course, Chris has The Weekly Blitz on the Automotive Repair Podcast Network. It was episode 269 Please, you've got to go to your favorite podcast listening app and you got to listen to it. It's all about coaching to valuation. Chris, I got something off the top of my mind that I got to talk about. But look, you're going to hear stuff like owner independence, profit versus valuation, blue sky, honesty, turning your job into an asset. Duh, really? Oh, I can't believe that. Maybe finally someday I can actually do what I dreamt I want to do 10, 15 years ago.

You nailed it, man. I can't wait to get into this with you. But thank you so much to our great sponsors, Napa Auto Care and Napa Tracs.

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Hey, welcome back, everyone. Don't forget about our great podcast listening app, arpn.app. It's all in one place. You can hear Chris' shows there. The coolest. Say favorites, share episodes with people, download for listening while you don't have internet. Say you're on an airplane or up in the mountains someday and you want to listen to our stuff. It's all there, arpn.app. Chris, I got to start this out by telling a really quick story, Chris. Five years ago, a shop go down to a guy in the next town and he says, hey, let's go have coffee.

He sits down there and he goes, I'm looking to expand. You have any interest in maybe wanting to get out? The guy says, I want a million dollars for my business.

Chris Cotton (2:37)

That's the standard answer, right? Like everybody wants a million, yeah.

Carm Capriotto (2:41)

Exactly right, Chris. The owner is sitting there and five years ago, they would have fell off their chair laughing, holding their belly because they know what kind of business that they have. It's nowhere near worth that, but the owner has his expectations of a million bucks. But today, people will go and sit in front of that individual when he says a million bucks and he goes, great.

He says, if I can pay for this thing in five years, I'll give you your million bucks. Well, what do you need from me? I need a balance sheet, I need a profit and loss statement, I probably need some cash to lend to see your payroll. I'll have my lawyer send you a confidentiality, non-disclosure, okay? He goes back to mama and he goes, honey, I told you I was going to get a million bucks for the business.

Well, great. What do we need? He goes, I need a profit and loss statement, a balance sheet, all this really cool financial stuff. She goes, you mean all that stuff that's sitting in those boxes in the garage? Meaning all those receipts that never were formed into anything. You talked about that in this episode and Chris to say, listen guys, we're going to take this up four or five notches to valuation. Everything you're going to do is going to be about that. So Chris, I just want you to start. Where was the premise of this? And it is so powerful. The stage is yours, my friend.

Chris Cotton (3:55)

Well, so you have all this private equity stuff coming in and people are buying other shops. People are looking to retire. The silver tsunami, these are all things that we've talked about before. And I'm always looking for ways for AutoFix to be a better coaching company. Like, how do we do what we do? How do we measure what we do?

In several years, I was the first coach in the industry to do the profit first method and arrange it for auto repair shops. And I'm like, what is the next level? Like, what do I want to work on for the next five, six, seven, ten years? And what carries AutoFix through? And in turn, how do we carry that through with our clients? And we always talk about return on investment, how we're helping shops make profits, which is great because a lot of shops don't make a profit. But how do we quantify that? How do we track and measure it? Because it's one thing I know you've heard me say a million times, Carm, if we track and measure something, we can fix it or we can make it better or whatever. So, that's when I had this aha moment of okay, a lot of people, the buzzword now is what is my shop's worth? What could I get for it? Even if you don't want to sell it, which is fine, like you don't, I'm not going to force you to sell it, but let's coach you to have the biggest evaluation or valuation that you can have moving forward in case you ever do want to sell or in case you want to sell to your kids or whatever. So to give you the overview, we're still going to coach for profits, but we're going to take your balance sheet, we're going to take your income statement, and we have a methodology and a platform now where we can take that information and we can put it in. It's not just AI, but what we've done is we've taken all of my brain material, and it's like if there are any Harry Potter fans out there, Dumbledore takes his wand and pulls his memories out and throws them in a bowl, I think he calls the pensive. And so I've sucked all this information, but I've put it in a platform, and now we can give you a valuation based on what we know about the industry and based on what we know about accounting principles. So we have to have an income statement and a balance sheet that match for one year minimum, would love three years, but then we can look and see where you're at now, and then we start coaching towards that data set. Okay, we're going to increase profits. But when I was running this model or when I was playing with it and when it was getting worked on, one of the things we noticed is if you have a business and you have a valuation, the minute you take the shop owner out and put a service advisor or manager in, it jumped the valuation up by a quarter of a million dollars a year. And so there are pieces to this that you can do in your business to make your business more valuable. And so instead of saying, hey, you're not profitable, now we're going to make you profitable. We're going to be like, okay, you thought your business was worth a million dollars. It's really only worth $150,000.