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Digg it UP - My Philosophy on Valuations
I think one of the biggest challenges facing companies at just about any timeframe of its corporate life is focus. The focus I am referring to relates to a number of areas within the company. First is the notion of culture. Does your company have more of a sales-driven culture, (which represents a majority of companies)? Or is your company an engineering driven culture? Or is it a marketing-driven culture? In my experience, a small percentage of companies are based on a marketing-driven culture, more than half are sales-driven, and for technology, they are generally engineering-driven. Not being a marketing-driven company is big challenge to maintaining consistent focus.What I mean by marketing-driven is looking from the ground up at everything you are doing as a marketing opportunity. So, for example, looking at your sales strategy. Is your sales guy running the show? This is very common. The sales guys come in and they want th
While I have always placed a strong emphasis on valuation, I perhaps place an even greater emphasis on the quality of the employees, the client base, the product and service mix, the reputation of the business within the market place, the character of manage
One of the great things about being an employee and working for someone else is that when the clock hits five you are basically done for the day and you jump in your car and you are gone. You do not have to worry about anything until the next day when work starts again. Your mind is free and you own it.When you own a small business it really owns you and there is always some aspect of your business on your mind. But sometimes this can cause stress. Is there something about your small business that keeps you up that night? If there is there are ways to deal with this and ignoring it will not help you, as it only will make things worse.The easiest way to the alleviate stress in your small business is to get back to basics. Re-read your mission statement and business plan. Does it say all you want to say? Maybe it is time to revise it? Write down all the things that you want to accomplish and your goals for this mont
When I’m on the buy-side of the table I’m looking to drive down valuations to make accretive purchases that provide a solid return on investment. When I’m on the sell-side of the table I attempt to secure the highest valuation possible in order to maximize my return on equity. It is easy to see and to understand the divergent interests in play between buyer and seller. Thus when both the buy-side and sell-side parties are in alignment on valuation metrics and philosophy the transaction in play will have a certainty of execution that does not exist when there is either a philosophical gap or a large pricing delta between the bid and the ask.
Regardless of which side of the table you sit on the best way to close a gap in valuation is not by continuing to hammer on the financial metrics in a vacuum, but to rather use non-financial metrics to justify movement in valuation pricing.
While I have always placed a strong emphasis on valuation, I perhaps place an even greater emphasis on the quality of the employees, the client base, the product and service mix, the reputation of the business within the market place, the character of managem
Dear Friend,You’re ripping me off.How? You may be thinking, “We just met. How could I possibly have stolen from you?”But you did! The fact is that you have valuable information inside you. You have golden nuggets that can make other lives better. Maybe you have already developed them into products, services, seminars, newsletters or email lists. But if you do not market your gold, how will anyone know? You must then persuade people to buy and use them because people are overwhelmed with all the options they have. But if you don’t make your wisdom available, you are hurting me and others.I don’t care if it’s a security alarm, a beauty product, financial services, a business opportunity, or anything else. Your knowledge, product, or service could be helping people solve their problems. And if you think your stuff can’t help people, why are you doing it in the first place?So many times I see people out t
When I’m on the buy-side of the table I’m looking to drive down valuations to make accretive purchases that provide a solid return on investment. When I’m on the sell-side of the table I attempt to secure the highest valuation possible in order to maximize my return on equity. It is easy to see and to understand the divergent interests in play between buyer and seller. Thus when both the buy-side and sell-side parties are in alignment on valuation metrics and philosophy the transaction in play will have a certainty of execution that does not exist when there is either a philosophical gap or a large pricing delta between the bid and the ask.
Regardless of which side of the table you sit on the best way to close a gap in valuation is not by continuing to hammer on the financial metrics in a vacuum, but to rather use non-financial metrics to justify movement in valuation pricing.
While I have always placed a strong emphasis on valuation, I perhaps place an even greater emphasis on the quality of the employees, the client base, the product and service mix, the reputation of the business within the market place, the character of manage
You may already know that promotional items are an important part of advertising your company and getting the word out, but what are corporate gifts and how do they help promote your company?Corporate gifts differ from promotional items primarily in their price, and value. Most promotional items given out to random potential customers and current customers are inexpensive, and they take the form of low value items such as pens and keychains. While these items are a great idea for attracting new customers and reminding former customers of your business, they may not be the best choice for rewarding current customers who do a lot of business with you.So what are corporate gifts? Well, they are usually items that are given to other companies (or occasionally, good retail customers) that remind them how thankful you are for their business. These gifts can range from something like a custom pen set (not a plastic ball-point pe
Regardless of which side of the table you sit on the best way to close a gap in valuation is not by continuing to hammer on the financial metrics in a vacuum, but to rather use non-financial metrics to justify movement in valuation pricing.
While I have always placed a strong emphasis on valuation, I perhaps place an even greater emphasis on the quality of the employees, the client base, the product and service mix, the reputation of the business within the market place, the character of manage
If the problem you are working on is significant, you will run into trouble along the way—count on it. Maybe you’ll find that your problem definition is too narrow or too broad. Maybe you’ll find that you missed a key root cause, or misjudged the importance of the causes you did identify. Maybe you’ll find that your corrective action didn’t, in fact, eliminate a root cause. When one or more of these happen to you, recognize what has happened and tell your stakeholders, then back up in the problem-solving process and try again.Of course, you can also run into the usual risks for any significant project such as key people leaving, priority changes, etc. Setbacks are a normal part of the problem-solving process, but nevertheless can be very discouraging, especially if you think you’re nearing the end of the project when you run into them.There are two special dangers to watch out for. First is the ostrich effect, wher
Regardless of which side of the table you sit on the best way to close a gap in valuation is not by continuing to hammer on the financial metrics in a vacuum, but to rather use non-financial metrics to justify movement in valuation pricing.
While I have always placed a strong emphasis on valuation, I perhaps place an even greater emphasis on the quality of the employees, the client base, the product and service mix, the reputation of the business within the market place, the character of manage
Ever felt cluttered? I hate to feel cluttered, feeling cluttered is like feeling stuck, feeling that something is weighing you down and feeling out of control. Is it psychological? I hope not, but it might as well be, I used to have my little mess well stacked one on top of the other, it wasn’t working out, until I came across a system that helps me get organized and rearrange my workload.If you’re not using a blackberry or a palm, one thing I’ve learned is you need to organize your work according to priority, the most important to the least important, then divide them into sub-categories, it depends on what system you want to use, you need to see the end first, what feelings do you want to have at the end of the day? feel that you have completed something, you want to have that sense of accomplishment.As an entrepreneur, I know how challenging organizing your day, events, agenda, and contacts can be, that’ s why I
While I have always placed a strong emphasis on valuation, I perhaps place an even greater emphasis on the quality of the employees, the client base, the product and service mix, the reputation of the business within the market place, the character of management and the integrity of the management process, current trends and future forecasts of the competitive landscape etc. Acquiring a large revenue stream that is also a poorly run organization simply results in a much "larger" headache. Simply put, building critical mass is not the same thing as building an excellent organization.
However, equally important to me is the recognition that there must be an excellent cultural and organizational "fit" in order for any acquisition to succeed. By “fit”, I simply mean a similar set of values and practices regarding the actual running of an ongoing business: business ethics, work styles, work ethics, a vision for the future, perpetuation objectives, leadership styles, and so on. It is the valuation of the non-financial metrics described in the last two paragraphs that should be the major influencing factors in your decisioning behind the justification of the final valuation.
Now that we’ve discussed the major influencing factors behind how to negotiate movement in valuation I want to give you an overview of what I believe is the “right” way to arrive at the “right” number to begin with. There is an abundance of available data on common industry rules of thumb concerning “multiples” that can be used to estimate the value of a business. However, while multiples may be useful in providing an immediate ballpark of a business’s value, they do not substitute for a more comprehensive
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