How Small Business Valuation Works (S8E5)


By Episode 3, you’ve likely grown accustomed to the riveting routine of a Bloxer’s day at The Blox, and this episode is no exception. Prepare for another useful entrepreneurial lesson, an arduous challenge, and an even more intense Blox-Off as the anticipation for the final two days intensifies. The atmosphere is charged up as contestants pour their all into vying for the prestigious title of the ultimate startup on The Blox. With their entrepreneurial prowess pushed to the limit, the burning question lingers: Will their relentless efforts prove sufficient to clinch the coveted victory? Day 3 is bound to deliver even more action and insight, and you won’t want to miss a moment of it.


As Day 3 unfolds, the pod winners from the previous night are treated to a breakfast rendezvous with the judges, engaging in conversations about the fierce competition and their evolving thought processes. Simultaneously, some other pod winners share their experiences, delving into the delicate balance of parenthood and entrepreneurship.

Gathering at The Grid, the entire Blox community embarks on their next learning adventure, exploring small business valuation. This lesson effectively combines two crucial classes: the art of utilizing equity as a means to collaborate with potential partners and investors, and the intricacies of business valuation. It’s an eye-opening experience as the Bloxers understand the concept of equity being like a pie, each slice representing a valuable resource within their business.

Day 3 introduces a unique exercise where no books or prior preparation is allowed – oh yes, it’s time for the signature Blox pop quiz bloodbath! One by one, the contestants venture into their pods for a test, facing a thorough examination by the judges on the day’s lessons, encompassing definitions, terms, and key concepts. Subsequent consultations provide much-needed clarity, shedding light on the emotional topic of finances, and even evoking a few teary heartfelt moments.

As the day progresses, the anticipation builds with the arrival of the third Blox-Off, and the announcement of the day’s pod winners. A few familiar faces secure their positions as pod winners, and each of them faces a barrage of questions about their company’s investments, the factors contributing to increased valuation, owned media, partnerships, and other pivotal elements. Concluding the episode, the Bloxers unwind, engaging in relaxed conversations and even a bit of beard trimming, while having a candid discussion on the trials and tribulations of the entrepreneurial journey.


We study small business valuation because it bridges the significant gap between a business’s current state and its potential to attract external financing from investors, such as angel investors, venture capitalists, and banks. This process often involves using equity as a bargaining chip to acquire the necessary resources and talent. Fixed equity split, also known as “splitting the pie,” refers to the distribution of equity to co-founders or vendors without mechanisms for retraction, regardless of changing circumstances, which can lead to dead equity issues.

The concept of a vesting schedule is introduced, which pre-negotiates stock percentage ownership for co-founders or vendors over a specific period, not earned upfront. It offers various advantages, such as granting more equity to those committed for the long haul and protecting the founder from individuals who might not deliver as promised. A “cliff” is another variable affecting equity distribution, safeguarding the founder from allocating any equity until a minimum level of commitment and value contribution is achieved.

Understanding valuation is vital for entrepreneurs, as it allows them to track how inputs translate into business value, an essential aspect when raising funds and distributing equity among co-founders or partners. Multiples, quick estimations of business value, are explained, and their factors, including safety of earnings, scalability of the business model, and various variables covered in the class, are discussed. The main variables assessed for valuation include comparables, traction, money spent, patents, owned media, partnerships, innovation metrics, advisors, purchase orders, business appeal, reviews, testimonials, social proof, and the team and founder’s attributes and experience.


  1. There is a Grand Canyon size gap between where you’re at right now and where you need to be before you become ubiquitously financeable. As in, you have enough traction to qualify for outside financing such as angel investors, VCs, and banks. To cross that gap we often have to use our equity as poker chips to pay for the people and things we need.
  2. A vesting schedule forces the aspiring co-founders to ask themselves if they can really get away with providing the value that they’re promising. Because if they can’t, their compensation can be taken away. This is clearly different from an employment role where a person can hide & stall within a company until they’re fired.
  3. Entrepreneurs need to do a better job understanding that they’re the biggest investor in their business by far and that your business is an investment asset. One needs to be able to track how inputs translate into value.
  4. Think of the variables an investor or acquirer will be tallying like points on a rubric, or period table. Meaning there are different categories in which one can score points, and within those categories, there are different items that are worth different amounts.

Get the latest episodes as soon as they drop

Subscribe now and never miss an episode.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Follow The Blox

Stay connected for all the latest entrepreneurship news, big announcements, and behind the scenes footage!

Want To Do More Than Just Watch The Show?

Would you rather be on it?

Watch The Full Unedited Consults

Meet The Judges

Adam C. Hanna
Adam C. Hanna
Founder & CEO, Tactical Elite Enterprises - Baton Rouge, LA

Adam C. Hanna, a United States Army Veteran and Security Professional, is a native to Baton Rouge, Louisiana with over 10 years of combined experience in the military, law enforcement, security management, and physical protection industry. He has worked in every aspect of the security industry from the government level to the private sector. Adam has received extensive training from his experience in the military, local law enforcement, and private security industry. His military training includes his initial training at the United State Army School of Military Intelligence at Fort Huachuca in Arizona. While there he also attended Cochise college for his AA in Intelligence Operations. He has attended college at Northwestern State University, where he began to study Criminal Justice and was a member of their AROTC program. Adam’s large background in Law Enforcement, Security and Protection includes everything from Executives, Doctors, Celebrities, and Foreign Nationals. He has provided security services for billionaire mansions, high risk workplace violence details, prominent families, celebrities, clubs, concerts, and professional athletes. He has managed and supervised a number of private security companies throughout the United States. He was on a task force commissioned by SFPD which ran warrants though SFHA projects. Adam has lead personal protection details in New Orleans, Los Angeles, Las Vegas, Houston, Dallas, San Antonio, Austin, Denver, and in the Colorado Springs area.

Heidi Luerra
Heidi Luerra
Founder & CEO of Raw Artist - Temecula, CA

For 20 years, Heidi Luerra has built, bootstrapped, and founded businesses in creative industries such as the arts, entertainment, fashion, and technology. With a strong and innate entrepreneurial spirit, Heidi started her first business when she was only 11 years old and has since built and sustained a global multi-million dollar enterprise, wrote and published her own book, and worked with thousands of creative companies throughout her career to date. With a deep respect for the underdog, her businesses have largely been built on the notion that entrepreneurs and creators deserve to be seen and heard. By harnessing technology, and unorthodox creative problem-solving she’s managed to disrupt industries, democratize communities, and build platforms that clear space to incubate this personal mission.

Justin Prestidge
Justin Prestidge
Owner, Custom Trailer Pros - Kansas City, MO

Justin created Custom Trailer Pros in 2012 with the specific goal of serving people who are wanting to get into the mobile food industry. At that time, there were very few who were able to effectively help those in this emerging market, and there was no one who was solely dedicated to it. From day one, Justin has been passionate about partnering with his customers – not just selling them a product – and he has created a team of people who all carry this same passion.

Lily Mockerman
Lily Mockerman
Founder & CEO, Total Customized Revenue Management - Austin, TX

President and CEO of Total Customized Revenue Management (TCRM), Lily is a passionate and devoted leader and practitioner in the revenue management field. Lily earned her Bachelor of Science degree in Hotel Management from Johnson & Wales University. Following graduation, Lily’s career encompassed a variety of roles and responsibilities, including positions with independent full-service, boutique and resort hotels, and work with major brands including Starwood Hotels & Resorts, Best Western Hotels & Resorts, Hilton Hotels, and Hyatt, and various management companies. With 13 years of diverse hospitality experience under her belt, Lily founded TCRM in 2012 leveraging her vision to become the premier provider of revenue management services for the hospitality community. In recognition of these efforts, she was named 2015 Revenue Management Professional of the Year by HSMAI’s Arizona Chapter. TCRM continues to grow under Lily’s leadership and has recently begun to expand into international markets.

Michael Cole
Michael Cole
President, Next Level Technician - Tega Cay, SC

Michael’s journey began on the distribution side of the telecom industry, where he sold the very products that technicians install. It didn’t take long for him to recognize a common need among customers: a demand for skilled technicians. This realization led him to embark on the path of training technicians to fill these vital roles, which eventually evolved into the establishment of Next Level Technician, a comprehensive staffing business. With over 20 years of combined experience in the telecommunications industry, Michael and his management team are well-versed in the field, understanding the needs and desires of both organizations and technicians. They consistently make the right connections, ensuring success in the ever-evolving world of structured cabling, fiber, AV, DAS, data center/collocation, and various other telecom applications. Michael Cole’s dedication to his role as a family man and his passion for helping individuals and organizations make him a notable figure in the industry.

Omar Ghadry
Omar Ghadry
Founder Advisor - International Nomad

Omar Ghadry has adventured through startup, corporate and growth stage organizations since 2002, building from concept to real business in different models, environments, and technological eras. Omar holds agency-quality digital and strategic expertise, born from consulting, advisory and startup experiences across industry: USG, edtech, healthcare, e-com, cannabis, creator/gig economy, beauty care, home services, cybersecurity, and CPG. While he enjoys winning “work passions”, Omar spends a lot of time meandering this life through writing, reading, sports, travel, deep existential conversation, and the celebration of other people’s most important moments.

Todd Putz
Todd Putz
Owner, Bottom Top Investments - Dayton, OH

Growing up Poor in Dayton, OH, Todd found a grind to do more, see more, be more and make more than his parents and those around him. Real Estate Investing became the ticket and Todd has grown his long-term portfolio to over 600 doors while his property management company handles another 500 doors for investors. Todd is also recognized as one of the top investment realtors in his area. His team still focuses on flips and wholesales to fund the other companies. Todd and his wife also own and operate developmental disability homes as well as mental health facilities. They have 3 awesome kids and love to travel the world.

Wendell Holland
Wendell Holland
Owner & Founder, Beve - Philadelphia, PA

Wendell grew up a creative and athletic child in the western Philadelphia suburb of Lower Merion. He received his BA in International Studies from Morehouse College, and JD from University of Pennsylvania Law School. After being a law clerk in Philadelphia Civil Court and Family Court, he took a leap of faith and turned his passion of building furniture into a career. Within years, he knew he made the right decision as other doors began opening. In 2018 one of his goals came true when he was cast on the CBS show Survivor: Ghost Island, and he won the show. Winning Survivor proved to Wendell that anything is attainable, and that has been his stance on life ever since. He now dreams of taking Beve to new heights.

See What Twitter Is Saying

Not Ready To Be On Our Show? But Still Looking For Additional Programming & Mentorship?

Check out our flagship program, BetaBlox. It's a multi-year education and mentorship program designed to help early-stage ventures start to take flight! Let us help you get to your first million dollars in sales.

Watch The Next Episode

Don’t miss out on the entrepreneurial rollercoaster ride! Tune in now to watch the next mind-blowing episode of The Blox and witness the fierce competition, invaluable lessons, and game-changing moments. Get your popcorn ready and join us for the adventure of a lifetime!