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The Real ROI: People and Culture Drive Business Value

The Real ROI: People and Culture Drive Business Value

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 In times of uncertainty, knowing what your business is worth—and how to protect or grow that value—can feel elusive. You are never sure what business you are really in. What should you do? How can you retain the value you have created and prepare for the next growth phase, or even the exit strategy? On this recent episode of On the Brink with Andi Simon, I had the pleasure of speaking with Dave Bookbinder. Dave is a business valuation expert whose groundbreaking work focuses on an often-overlooked truth: your people are your most valuable asset. Dave, the author of The New ROI: Return on Individuals, joined me to unpack how business owners can better understand, manage, and maximize the value of their companies—especially in a rapidly changing business environment. His key message? Valuation isn’t just a number. It’s a reflection of leadership, culture, and strategic clarity. Let me repeat that: Your business's value is a reflection of leadership, culture, and strategic clarity. What can Dave teach you about how to build and protect that value? The Human Side of Valuation Dave’s experience spans thousands of valuation engagements across industries. And while balance sheets highlight assets like patents and trademarks, human capital rarely makes the cut. “Every CEO says their people are their most valuable asset,” Dave points out, “but where do they show up on the balance sheet? They don’t.” That gap sparked his first book, The New ROI, which explores the critical link between culture, engagement, and enterprise value. His second, The New ROI: Going Behind the Numbers, draws from his award-winning podcast, Behind the Numbers, which focuses on how leadership and culture truly impact business performance. You will totally enjoy watching our video of the podcast here. Common Valuation Mistakes Dave shared some of the biggest pitfalls business owners face when it comes to valuing their company: Relying on rules of thumb: “Back-of-the-napkin” valuations based on hearsay can be wildly misleading. Dave recounted a client who declined a generous acquisition offer assuming better ones would follow. Years later, the business couldn’t command even half that valuation.Tax-driven financials: Many entrepreneurs minimize income to reduce taxes, only to struggle during a sale. Buyers don’t take your word for “adjusted EBITDA”—they want clean, auditable numbers.Unrealistic projections: Over-optimistic forecasts, especially those shaped like a hockey stick, often destroy credibility with buyers. “They’re buying the future,” Dave says. “And if your projections seem disconnected from market realities, they’ll discount for risk.” De-Risking Your Business to Maximize Value Buyers and investors are risk-averse. That’s why Dave emphasizes the need to "de-risk" your business: Clean financial statements: Avoid running personal expenses through the business. Have your books reviewed or audited by a CPA.Strong management team: If the business can’t run without you, it’s not scalable—or sellable.Documented processes: Institutional knowledge should live in systems, not just in people’s heads. “If your business can’t survive you getting hit by a bus,” Dave quips, “you don’t have a sellable business.” Exit Planning is a Process, Not an Event Whether you’re transferring ownership to a family member or preparing for an acquisition, Dave urges owners to think ahead. “Selling a business is like selling a house,” he explains. “You need to get an appraisal, clean it up, and understand what similar businesses are selling for.” He also warned that poorly integrated acquisitions often fail—not due to valuation issues, but because of clashing cultures. “Seventy-five to ninety percent of deals miss their synergy targets because they ignore people and culture,” he says. Why Culture is Core to Company Value As a corporate anthropologist, I know firsthand how culture shapes performance. Dave agrees. “It’s not that successful companies have a good culture—it’s that good culture drives success,” he said. When leaders overlook how work gets done—or try to impose a new cultural model without understanding the old one—they risk alienating key people and destroying value. Culture is the operating system of the business. Your People Are Your Value Dave’s work offers a refreshing, human-centric view of business valuation. Whether you're growing, planning an exit, or considering acquisitions, the lesson is clear: your people, your culture, and your credibility are the real ROI. If you’re curious to learn more, check out Dave’s books on Amazon: The New ROI: Return on IndividualsThe New ROI: Going Behind the NumbersThe Valuation Toolbox for Business Owners and Their Advisors And tune into his award-winning podcast, Behind the Numbers. Final Thought In today’s volatile market, it's not just about numbers—it's about narratives. The story...

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