San Diego: To understand ownership, we have to understand something about the value of what is owned. It is a lot more than your current ratio (current assets divided by the current liabilities). Business valuation involves multiples, which are unique in every industry, and intangibles, that is your goodwill and so much more. There are several episodes of the show that focus on business valuation.

Once you start that process, you'll discover a range of value for the equity in the business. So, if you need some liquidity or you want to move to Step 8 and make your business sustainable, you do have choices. If you find the people in this episode compelling and you have employees, you might begin thinking the equity contribution that each employee is making.

We meet Rick Valencia, founder of ProfitLine, recognized as one of the best places in San Diego in which to work. You might ask yourself, "How did he get employees to think about the profit line of his business?" The simple answer is, "He vested them." And he does it within 90 days of their start date! Sharing equity for Rick is a means to have them care about the business.

Once a person is actively participating in the bottom line or the profit line of the business, once they are vested, don't you think they'd act differently? Care more? Ray Smilor says that typical productivity increases 4-5% per year. What would that do to your profit line?

LIQUIDITY: Although these three businesses (in this episode of the show) did not start their employee ownership program as a way to get liquid or as an exit strategy, Ray's description of both is clear.

The tax advantages are clear.

GO FURTHER: Spend some time with the eight key points of the case study guide (upper right corner in the green box) and each of the related transcript segments.

Here is a print version of the transcript.

RELATED STORIES: Other episodes of the show that study how people use the equity in their business are linked from this version of this homepage (links are in the upper right, steel-blue box). Also, there is more information about liquidity within Step 7 and Step 8.

OUR ESOP REFERENCE PAGE: When business owners mentioned employee stock ownership on earlier shows, we began compiling this page of information. One of those business owners, the founder of Ziba Designs, credits their employee ownership plan with the their sudden break out from many years of static growth.

CONTACT: Ray Smilor, Executive Director
Beyster Institute at the Rady School of Management, University of California, San Diego
1241 Cave Street
La Jolla, California 92037
Tel: 858.822.6000
URL: http://www.beysterinstitute.org
Email: Click here

Hot Dog On A Stick a/k/a HDOS Enterprises
5601 Palmer Way
Carlsbad, CA 92008
Tel: 760.930.0456
URL: http://www.hotdogonastick.com/
Email: Click here

Rick Valenica, President
ProfitLine, Inc.
9920 Pacific Heights Blvd. Suite 200
San Diego, CA 92121
Tel: 858.452.6800
URL: http://www.profitline.com/
Email: Click here

Tom Griffith
VP Marketing and Business Development
Maxim Systems, Inc.
1455 Frazee Road, Suite 100
San Diego, CA 92108-4302
Tel: 619.574.2400
URL: http://www.maximsys.com/
Email: Click here

JOIN, JOIN, JOIN: Your professional associations in your industry are your key to continuing education, market research, collaborations, strategic partnerships, capital and so much more ... often you'll find that you enjoy like-minded people and many will become friends for life.

		A Tribute to Freddie Thode 1942 - 2007 President & CEO Hot Dogs on a Stick, Muscle Beach Lemonade, and Juicy Lucy’s of Carlsbad, California Freddie died of ALS (Lou Gehrig’s disease). In lieu of flowers, send donations to the ALS Association in Freddie’s memory.

• FIRST PRINCIPLES: Starting a business is the road to economic independence for most of us average people. Read a little more to see why incorporating a business keeps the passion of the American revolution alive!

"Even if you're the one who's the shining light at the beginning, even if you're the one on whom everything depends, five or 10 or 15 or 20 years down the road you have to think, `When I step out of this, what have I built that has value?'" - Ray Smilor Executive Director, Beyster Institute at the Rady School of Management, University of California, San Diego

• UNDERSTANDING INTANGIBLES: For most businesses today, up to 85% of the value of your business are intangibles yet you will not find them on your balance sheet. For example, the value of your web site does not show up. Get to know FASB and their GAAP and encourage your CPA to further open the discussions about intangibles.

• National ESOP Associations : If ESOPs are interesting, besides the Beyster Institute, also read through the web pages of these two professional ESOP association: The ESOP Association and the National Center for Employee Ownership.

• CASES BY BUSINESS TYPE. Click on the heading to find all the business types and then click on your type of business to check out those case studies.

• Selection Criteria: Awards, recognition, and volunteerism are all important in this selection process.
  
  AWARDS: We are always encouraged when people are recognized by their local community and national trade association.
  • HDOS Enterprises was named the 2003 Western States ESOP Association Company of the Year.
  • Ned Lester/Maxim Systems, Inc. was awarded the Ernst & Young San Diego Regional 2002 Entrepreneur of the Year® Award in High Technology.
  • Rick Valencia/ProfitLine Inc 500 was ranked by INC magazine as one of the nation's leading 500 entrepreneurial businesses based on sales growth over five years.

• Continuous Improvement
  • Freddie Thode was an active member in the International Council of Shopping Centers and International Foodservice Manufacturers Association
  • Rick Valencia: Society of Telecommunications Consultants (STC). Rick serves on the Industry Consultant Liaison Programs.
  • MAXIM Systems was awarded a Small Business Innovative Research grant by the Department of Education
• VOLUNTEER.
  • Rick Valencia: Board of directors, Big Brothers and Sisters of San Diego.
  • MAXIM Systems supports READ/San Diego. Employee-owners are involved with READ/San Diego tutor training sessions.

• SUPPORT PUBLIC TELEVISION:
  Become a member of your local station. If you are already, great. If not and your business is doing well, consider joining the Producers' Club ($1000).