Artificial Intelligence Podcast: ChatGPT, Claude, Midjourney and all other AI Tools

Can AI Solve the Silver Tsunami with Jonathan Cheung

• Jonathan Green : Artificial Intelligence Expert and Author of ChatGPT Profits • Episode 388

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Welcome to the Artificial Intelligence Podcast with Jonathan Green! In this episode, we tackle a massive generational challenge: can AI help solve the “silver tsunami” of baby boomer business owners looking to exit their companies—and do it in a way that protects jobs, preserves legacy, and maximizes value?

Our special guest is Jonathan Cheung, a business broker with Transworld Business Advisors, the world’s largest business brokerage firm. Jonathan specializes in helping small and medium sized business owners successfully exit, and he brings a rare combination of big firm valuation expertise (KPMG, Facebook, tech valuations) and hands-on experience with traditional, Main Street businesses.

Notable Quotes:

  • “I think it's a historical moment where trillions of dollars are expected to transfer over the next two decades. It's really the largest wealth transfer in history.” – [Jonathan Cheung]
  • “AI as a source of labor… works for you 24/7 and is able to have more predictable outcomes.” – [Jonathan Cheung]
  • “Every business someone started themselves, there’s no instruction manual. That’s why their first hires struggle—nothing is documented.” – [Jonathan Green]
  • “People either massively overvalue or massively undervalue their business. They’ll shut down a thriving business and say, ‘Nobody wants it,’ or think it’s worth 10, 50, 100 times what it is.” – [Jonathan Green]

Connect with Jonathan Cheung:

If you’re interested in how AI can protect your legacy, increase your exit valuation, and help your business survive into the next generation, this episode is a must listen.

Connect with Jonathan Green

Jonathan Green:

Can AI solve the silver tsunami with today's amazing special guest, Jonathan Cheung. Welcome to the Artificial Intelligence Podcast, where we make AI simple, practical, and accessible for small business owners and leaders. Forget the complicated Tech talk or expensive consultants. This is where you'll learn how to implement AI strategies that are easy to understand and can make a big impact for your business. The Artificial Intelligence Podcast is brought to you by fraction aio. The trusted partner for AI Digital Transformation at fraction A IO, we help small and medium sized businesses boost revenue by eliminating time wasting non-revenue generating tasks that frustrate your team. With our custom AI bots, tools and automations, we make it easy to shift your team's focus to the tasks that matter most. Driving growth and results, we guide you through a smooth. Seamless transition to ai ensuring you avoid costly mistakes and invest in the tools that truly deliver value. Don't get left behind. Let fraction aio o help you stay ahead in today's AI driven world. Learn more. Get started. Fraction aio.com. Now, Jonathan, I'm so excited to have you here because you first introduced me to this topic, and it's something I'm very aware of. We have a lot of people who have family businesses and we don't want whatever we wanna do. It's never what our parents did. And so there's a lot of these businesses that are. Free internet or pre-technology, and there's all these opportunities there, but a lot of people just think nobody wants it. I'll just shut it down. And there's all of these businesses that are critical to American infrastructure. We don't think about because tech companies are so exciting. It's exciting to talk about ai, but. I spend a lot more time eating food and washing my clothes and doing these things that are part of regular life than I do using ai, which is more of, at this point, it's exciting and it's fun, but it's not a necessity like food and shelters. So what is happening right now with this wave of baby boomers and older generation who are in the final 10 to 20 years of running their business and. Not sure how to transition out, what is the opportunity there for these businesses to become more automated and to survive into the next generation?

Jonathan Cheung:

Absolutely. Jonathan, first of all, thanks for having me here. Super excited. Jonathan Cheung from transworld Business Advisors with the world's largest business brokerage firm. We're in over 20 countries helping business owners exit their business, looking for, buyers that. Take care of their legacy, take care of their customers, their employees. The topic of silver tsunami definitely is a very interesting one, right? I think it's a historical moment, right? Where trillions of dollars right, are expected to transfer over the next two decades. It's really the largest wealth transfer in history, right? Anywhere from business assets to home equity as well too. So I think there's a few things here, right? So one is how do we help business owners get ready to make that transition, right? A lot of it is qualitative. Some of it is quantitative, right? Including improving obviously their financials and whatnot. I think where AI can play a huge component of this is helping, number one, I mean with reducing costs, right? Having, cost reduction potential, having, revenue generating potential as well too. I think the other aspect is predictability of quote unquote, labor, right? If we think about AI as a source of labor, right? We've in the US have outsourced, to cheaper kind of countries from a labor perspective, right? I think some businesses are thinking about AI as an alternative, source of labor that works for you 24 7, right? And able to have more predictable outcomes, you obviously can train it to be smarter and whatnot too. So there's that piece. And then I think just even from a onboarding kind of wealth of being able to document the wealth of knowledge within these companies, right? Especially at the smaller SMB small, medium sized business perspective, right? That has been more of an asset for larger businesses, right? Being able to invest in the documentation processes, where having laid out and redundancy in functions and whatnot. I think AI enables now SMBs to have that storage of, I think honestly it becomes an asset, right? Which makes the business more valuable as well.

Jonathan Green:

I think one challenges of a business you've yourself for so long is that you've probably never written down your process. You've just always done it the way you do it. And. Having seen the difference between a startup business and a franchise, the beauty of a franchise is that you have all the processes written down. It has an instruction manual. Every business, someone started themselves, there's no instruction manual, and that means there's hundreds of different ways they could have every process and. This is why a lot of these smaller businesses have trouble with their first hires because they haven't documented the process. They're like, figure it out. How do I use the cash register? How do you do this? What happens if someone asks for a refund? What happens if I close the cash register and I didn't count the money? Like all these small issues that you've solved and it's in here, I'm guilty of this too. As I've started growing my business and hiring employees, I realized that having SOPs and recording every process is so important because it's really hard to explain it. When you're not actually doing it,'cause you might miss one little step. And it's very challenging because especially if you're a small business owner and you're very busy, I don't have time to write down on process. I'm busy doing it so that AI can watch you and create that documentation and kind of fill in that gap where it can just watch you and see what you're doing. There's such a difference for me between watching a video of someone doing something and seeing the SOP they wrote. There's almost 99% of the time there's something in the video that the SOP doesn't cover. Like the step I get stuck on is not the step everyone else gets stuck on. So I really think this is a powerful use case where you can now document your process without giving up your time. Like you're just can watch you and start to learn from the, I think a lot of people have no sense of. What their business is worth. My experience is people either massively inflate or massively undervalue, they'll shut down a thriving business and they'll go, nobody wants it. My kids don't want it, and I don't wanna run it anymore. Or they'll think their business is worth 10, 50 or a hundred times more than it is. Like I'm always fascinated when people give a valuation and you say where'd you get the valuation? They go, oh, that's just what I feel like it's worth. And there's no math behind it. What is the process for deciding how much your company's worth, or if it's worth. If people would be even interested in buying it. Like how can someone who owns a business have a sense of that?

Jonathan Cheung:

Yeah, absolutely. And exactly what you mentioned, Jonathan. It's, my, my kind of personal story, why I joined the business brokerage space is really because of my family, right? We were small business owners in the little island of Guam or US territory. And we had a few not super large, but I think small businesses with brand recognition. Guam's such a small island, right? We're about 150,000 population. When we closed, right? And even at a young age, I was like, huh, there should be some value, right? There's, it was profitable, right? There's some brand recognition. And that's definitely, our why at transworld, right? Helping business owners really be able to capture the value that they've created, right? With that said there's different valuation methods, right? I'll start with the more, I guess like technical, what are the different ways, right? And just for background, I actually started my career at KPMG doing business and intangible asset valuation, right? So obviously working in big four, it's generally called the larger businesses, but the methods does translate to smaller SMBs as well too, right? Jonathan the main three approaches are the income approach. The market approach and the asset approach, right? So in terms of the income approach, that's really generally speaking for kinda larger businesses or they're growing fast, right? Hey, let's look at their projections over the next 5, 10, 15 years, depending on how fast they're growing. Leverage different ways to calculate how risky those projections are, right? To discount that back to the present now. Facebook was one of my favorite clients at KPMG. And at that point they were, private growing super fast. So for high growth client like that, we did look out 15 years out to be able to make that projection make sense. For smaller business, right? Maybe it's pretty stable, but it has recently signed a contract for the next, two, three years and expects a larger boost in revenue and profit. We'll also want to factor that into the current value, right? So income approach, more of a cash flow kind of projection approach. The second is the market approach, right? Which is looking at essentially past transaction data, right? The two sources of multiples was what we call it, right? So let's, we also look at publicly traded companies. So with that example, right when we value Facebook, we would look at, hey, what is Google being valued at at a stage of a similar hydro, right? And obviously other companies like Amazon and whatnot as well too. What is their price to their EBITDA ratio? Earnings before interest, tax depreciation, amortization, right? For some industries it's, we will look at also enterprise value divided by revenue, right? But for most businesses it's cashflow, right? So what is that cashflow? Multiple. The other source of transaction data. Especially for SMDs is just past transactions, right? So what has closed, for those similar industries, right? And what are they trading? There's it's interesting right there. There's a few dynamics that come in play for, how do for kind of the larger scale businesses, right? We see multiples that are very high, especially in tech, but for more traditional industries, right? Especially the industries we play in as a business brokerage firm, right? Manufacturing, right? Service businesses f and b right? Kinda more traditional industries. How much the banks are able to fund an SBA loan. Also, honestly, factors in the market pricing, right? So there's a lot of, I guess science to it, right? There's definitely art but there's some science in what multiple we end up applying to that business. So that's the market approach. The third approach is what we call the asset approach, Jonathan. Generally speaking, if a business is profitable, the income or the marketer approach will yield a higher valuation range, right? It's really, hey, you are a, a factory or you are, some equipment heavy business, right? You're a restaurant. You're cash flow neutral or maybe you're in the red, right? But there's still value to it, right? Someone can buy that business, take the app the equipment and be able to monetize, change the brand, right? And do your own thing. So that, that's more tangible assets, right? There's businesses with intangible assets, right? Patents, trademarks, customer lists, right? All different animal in terms of how to value intangible asset, but the fundamentals the same, right? So if I buy these assets, whether it's tangible or intangible, what is the projected cash flow I can earn from that? Some of, so that's one piece to it. Other cost or the other kind of way to think about asset approach is what is the cost to replace that? So if I were to buy a secondhand, CNC machine, right? How much would that cost on the market today to factor in that revolution?

Jonathan Green:

So I live on a tropical island too, and I remember a business was, they were going outta business and they said they wanted a seven figure valuation and we're on a tropical island, and it was a bar that's next to a gas station. It wasn't even on the beach. I was like, what? And I remember they said, you get our brand. And I was like. Why do you think your brand is worth so much? You have a terrible location. And I said to my wife, I said, I bet they're gonna be selling off the assets within a few months. And they were like selling off the chairs and all the pieces, right? Because they massively overvalued. Certain assets I think brand is one of the most common things. People overvalue, they think they have a brand when they don't like Coca-Cola, McDonald's, they have a brand. Everyone knows who they are. You have to be, I feel like much larger than people think to have a brand and have brand recognition. What are some of the other assets that people massively overvalue besides like their brand or their name that they think increases evaluation but actually doesn't?

Jonathan Cheung:

Yeah, that's a great point. Patents, honestly is one key thing, right? It, it's the unfortunate truth where, patents generally are a great way to protect your revenue or cash flow, right? And we've seen so many startups then some of them are not really a quote unquote startup, right? They've been in business for decades, right? Smaller tech companies, right? Where they invest so significantly in protecting the panels that they have, right? But when it comes down to it, look if your revenue and your cashflow, it is what it is, right? And that really factors in most of what would give you your market rate, right? And patents help defend it, right? So we may be able to apply a higher multiple, right? To get you a significant, a meaningful, or a, some sort of higher valuation. But it's not gonna be like, Hey your fundamentals suggest that your business is worth 2 million. Hey, I have patents. It doesn't make your business a 10 million, right? Maybe. We'll we can argue for 2.5, right? Some sort of slightly a premium, right? So I think that's one thing. And for, and I'm in Southern California now. I spend most of my career in the Bay Area, right? So you definitely see a lot of startups. I use a lot of their funding or their initial revenue on reinvesting more patents, right? But the truth is, look if a larger player and especially in software, right? Software is so hard to prove that you're infringing on someone's, patent, right? Of all are as the smaller company, right? Are you actually able to see, hey what is an Adobe or a Cisco, right? Where an Apple is using your product, right? So you have to be the end user first to and enterprise software is even harder, right? There's so many kind of players out there, right? Salesforce, it's in so many different industries too. So to be able to, find that there could be some infringement is a thing. Proving It is another, right? How do you actually prove, like this way is the only way to get this function to be done, right? And then the last piece is even if have a good case for it, are you actually gonna win a legal battle? So that, that's where I think, patents are great, especially if you're actually making decent sized revenue, right? We could, we can have some play there in terms of, arguing for higher valuation, looking for strategic buyers and whatnot to get you a pretty premium price. But if you're not that profitable you know having two or three patents is not been right. And as Jonathan, honestly, if you're really getting to a larger addressable market, you need dozens of patents. You need a patent in every potential way, right? To be able to defend that.

Jonathan Green:

Yeah, I've been watching this big lawsuit out of Japan now where Pokemon is trying to sue another video game because they say, oh, you can't have animals that fight for you. We own that. And they just lost the lawsuit in Japan, they lost the first patent thing because they weren't the first game that ever, they didn't invent that It already existed before them. And then in America, they just said. Hey, let's review all of Nintendos and Pokemon's patents. So now they might actually, they might backfire to where they thought it was their defense and now we might just take your patents away. And they're looking at all of their patents and I think we forget, lawsuits take a long time, cost a lot of money. And there are big turnoff for investors. Like when someone says, oh, we're suing a bunch of people. Most people don't wanna be part of a lawsuit. Like it's not something that's exciting because all you have to do is have an unlucky jury or something can go wrong, and suddenly they're talking about piercing the veil and going after the investors, and it's I don't want to, I don't like that talk. Like I don't want to hear that. I think that's really good to bring up because I think people think a patent is like this magic card. That means no one can touch me. But I've worked with people who've been through like decades of patent infringement, lawsuits, and it can take, and if you're lucky, you recover some of it after all of your fees and costs and the stress and there's, and you can't, it's very hard to run your business and be part of a major lawsuit, especially if you're a smaller company. I think that's really interesting because a lot of companies this other thing I see is where people don't have a really strong definition of who their customer base is. And so they'll say things like if 10% of everyone in China buys my product, and it's yeah, that, that's any product. Like they think that the market valuation when you're looking at addressable market is everyone and. I see this happen in other areas. It's very common in social media where people use terms like reach and I'm like, what does reach mean? Like how many people could have seen your posts? I'm like, what? But how many people did See, it seems way more important, and I see this with a lot of startups where they're trying to make it seem like they have more users than they have and they'll say, oh, we have users, or, certain companies, do monthly active users instead of daily active users. And then like I know, right? As soon as they say that, you know they're doing something that's right. It's oh, you're counting a different number than everyone else. Or you're doing non-standard accounting. When you're looking at a company and evaluation, what are some of the practices that make you want, you go, I don't wanna be a part of this, or This makes me nervous. If it's strange accounting, or if it's how they count their users. What are some of the other things that you've seen companies do that make it much harder for them to sell?

Jonathan Cheung:

Yeah, absolutely. I'll definitely talk about some kind of what we call red flags, right? Or risk factors, right? And when you think about the valuation of business, it's really the lower the risk, the higher the value, right? So I would say these are, I'll just call it risk factors, right? I. Solvable problems. And we actually have a, another practice called Exit Factor that helps business owners get ready to solve, right? And we work with a lot of partners that, for example, one Risks. And in the head, Jonathan, which it's, books that could be cleaner, right? And especially for the smaller size businesses, right? Family ran, some of it is cash income, right? How do we let a third party believe in the numbers that are presented? So there's times we do work with book bookkeeping companies that specialize in cleaning up books. For larger deals it could be a quality of earning report, right? Or third party to come in, usually x big four CPAs, right? To come in and really. Have a third party stamp on, on what's presented from a numbers perspective. But I think the, the other big thing is if the owner is the business, right? I think a good test is, hey, business owner, can you go on vacation for three weeks and the business is not gonna, it's still gonna run, right? I think that's a key test, right? A lot of times, surprisingly, even for more sizable businesses with, meaningful amount of revenue and employees, the business the owner is still honestly too active, right? So that's one of our suggestions from the exit plan side, right? Okay. You need to have a little bit more redundancy. You need to offload, you need to have, going back to the first topic we talked about, having documented processes, right? So that other people can recover, right? When you're on vacation. Other aspects are high customer concentration, right? If you have, 20 clients. Your top client is 90% of your revenue giving streams here. But that's a huge risk factor, right? Supplier risk, right? If, one of your suppliers bought a business tomorrow, right? You can't be able to provide inventory, right? Those are some of the kind of basic ones. I would say where we come in as brokers and exit consultants is try to no one, actually help the client take steps to mitigate those risks or really evaluate if it really is a risk, right? We represent quite a few CN CM team stocks, right? And a lot of them meaningful revenue, right? Anywhere from, call it two to $20 million revenue. But sometimes they only have a handful of clients, right? Because their client could be boeing, right? And but hey, is it really that big of a risk if Boeing has bought from them for 20 years straight? So then we think about other ways to evaluate it, how really big the risk is, right? So how many different products is Boeing buying from? Okay, they're buying 50 products, right? So within the 50 products, how many years have they bought, right? What's the volume, what's the change right? In emergency patterns, right? But yeah, all in all, I think, the and this is where, talking back to ai, right? I think with some of these risks, right? AI can help a lot, right? Where what would the owner respond? Having AI be able to respond to their employees the way that kind of, the knowledge documentation inventory control, things like that. I feel like all of that just helps with mitigating some of the risk factors.

Jonathan Green:

My experience has been that a lot of people just look at the upside. So when they're thinking about what my business is worth, they just look at the possibility and it's always, oh, this is a client. Oh, have you talked like, and I've seen this before where I'm like, oh, have you talked to them? And they go, oh yeah, we're about to close the deal. Nowadays because we record every phone call. I go, great, let me see the transcript. And I look at the transcript, I'm like, this person's not interested. And it reminds me of like when I was in high school and how I would assess a conversation with a lady versus anyone else going, oh, she does not like him. It's going bad. And I'm like, I think it went great. And no, it went barely bad. You can't self-assess because you have these rose colored glasses. And I love that you brought up risk, because I often have to explain to people that risk management is a huge part of how I run my business. That every time there's a project I look at am I gonna get paid upfront or long term? If it's something I'm getting paid on the backend, that's high risk because. The other person could drop out or something could happen. So the more of that, I'm always managing that and or a slow money versus fast money. And I see this in real estate where most people that get destroyed in real estate, they didn't look at the downside and they go after a deal, they get emotionally invested and it's if it goes bad, it's devastating. And like the people that succeed are the people who manage that. They look at the downside first and go, I don't care if this deal could change my life. It could also ruin it. I don't wanna play like this dangerous game all in every time I do a deal. A lot of business owners, there's, they look at all the good things and they don't look at the risk and they don't think about one of the things that really interested me, and I talked to someone who helps to sell podcasts. I was like how could you possibly sell my podcast? And he is, and they explained it to me. It was very fascinating. He goes, what you do is you bring in a cohost slowly and then you start taking sick days and slowly transitioning out. He's it takes one to two years to change hosts. And my kids watch this show blippy, and there's two blippies. There's the original guy, and I think he got paid like $500 million. I'm like, he's not doing it anymore. Wow. You know what I mean? That's, I'm, that's, I'm doing something else, but the new guy is not the same height. And I can, I always I was watching, I go, that's not the same guy, but my kids can't really tell. But I watched how they, but what they do is they don't, they mix old and new episodes. So there is a way to transition out, but you have to if you don't start doing it before the sale, that's when you end up like you have to stay for two years or three years. As we transition you out. So if you don't have this plan and start thinking about how can I not become the center of my business? And it's very hard for people to sell this because we get, when we start thinking about our business, we ima we start spending the money before we've made it and it starts putting people in place. So I really like talking about risk'cause I think it's so important. How much we talked, you talked about how like AI as labor provides a consistency. It's not gonna go on strike, it's not gonna get sick, it's not gonna take days off. How much can a company increase their valuation if they are very automated? I've worked with clients that some of their technology is 1990s, like their bookkeeping is. Basic spreadsheet. I know you've talked about people that do pen and paper, like there's these little things that can make a huge difference, right? To automation. How much of these things, how much can it affect the valuation? If you have two companies that are exactly the same, one is pen and paper, and one is like cutting edge everything is automated, there's records of everything, there's perfect inventory management. How much of a difference does that make?

Jonathan Cheung:

Yeah. Yeah, absolutely. I think, if I had to give a rough estimate of what the premium is, I would say maybe between 10 to 20%. But with that said, I think the way we think about it is really still to the fundamentals, right? So what is the cash flow, right? So if presumably we could actually compare before the AI kind of implementation, right? What did cost look like, hopefully margins improved, right? So I think we could have those comparisons, right? Once we get the cash flow pretty much at steady state or the other hope is an AI enabled business may have higher growth rates than compared to before, right? So all that still factors in the kind of traditional valuation method I mentioned, income approach, market approach, right? So it's really what did it look like, after implementation. I think the other lever we can pull to defend the higher valuation is where hey, with the AI enabled kind of business, there's less risk of turnover, right? There's less risk of trying stuff we talked about, right? And so can we defend a higher multiple. If we're using the market approach, can we defend a higher multiple? If we're using the income approach, can we defend a lower discount rate because it is less risky, right? So those are the levers we pull to have a higher valuation. And obviously, depending on the industry, right? Like how I guess like how much more value can we extract with an a AI enabled kind of process, right? Also varies quite a bit based on industry.

Jonathan Green:

So for people who are, oh my God, I know what my company's worth and how can I kind of valuation, I know that's a lot of what you help people do is to be objective.'cause it's. Just it's so much easier for me to look at someone else's business, someone else's relationship. Like it's so hard to look at my own 'cause I'm on the inside of it. What is a little bit of your process and where people find what you're doing and maybe reach out to you online and say, Hey, we're not sure what our business is worth, here's what we're doing.

Jonathan Cheung:

Yeah, absolutely John. For all your listeners right, what we're happy to provide a complimentary business valuation, right? Taking our, what we see in the market today for their particular industry, their revenue range, right? We have over 650 buyers in our internal trades with database, right? So what we think the ranges that we could generate good buyer interest, right? Happy to offer that. My, my email is j Cheung@tworld.com, J-C-H-E-U-N-G. At T-W-O-R-L d.com. My cell phone is six two six eight six four three three six nine six two six, eight six four three three six nine on WhatsApp as well too. So definitely happy to chat. And we handle honestly a huge variety of deal size as well too, right? Anywhere from, a small restaurant, franchise resell, right? All the way up to over a hundred million dollars in purchase price, right? So very right. Wide range, right? And industry agnostic, right? I think that the only deal my office personally passed on was a commercial bank, right? So I. We passed it to one of our financial service, investment banking referral partners, right?'cause they have the right fin or licenses. But definitely we have industry domain expertise across our thousands of brokers globally, right? Definitely happy to help.

Jonathan Green:

That's amazing. I'll make sure to put all the information in the show notes and below the video on LinkedIn. Thank you so much for being here today, Jonathan, for an amazing episode of the Artificial Intelligence Podcast.

Jonathan Cheung:

Awesome. Thank you, Jonathan. Thanks everyone.

Jonathan Green:

Thank you for listening to this week's episode of the Artificial Intelligence Podcast. Make sure to subscribe so you never miss another episode. We'll be back next Monday with more tips and strategies on how to leverage AI to grow your business and achieve better results. In the meantime, if you're curious about how AI can boost your business' revenue, head over to artificial intelligence pod.com. Slash calculator, use our AI revenue calculator to discover the potential impact AI can have on your bottom line. It's quick, easy, and might just change the way. Think about your business while you're there. Catch up on past episodes. Leave a review and check out our socials.