In the tumult surrounding the 3D maelstrom (Debt Ceiling, Downgrading and Deficit) of several weeks ago, you may have missed another chilling corporate finance update on the relentless pursuit of performance metrics that extol the sunshine while you’re in the heart of darkness. Yes, there may be some economic value for certain of these metrics, but they’re dangerous barometers of realizable value and highly misleading as to future achievements of tangible operating profits and free cash flow.
Another Sign of the Apocalypse?
Most of us recall the “eyeball counting” that preceded the Dot-Com-Bomb and those certain “Signs of the Apocalypse”, as when your cab driver is telling you what stocks you should buy. (more…)
Last week, we began our conversation about business valuation. We continue that discussion today with a valuable chart that will help you understand some of the key valuation principles.
“Can anybody remember when the times were not hard and money not scarce?”
~ Ralph Waldo Emerson
What’s the difference between a Strategic & Financial Buyer
John Wilson, CEO of Ace Business Stuff, has been working diligently with his controller, Tom Sampson, to assess his financing needs. They may require an equity investor as he suspects that his controller’s right that bank financing may be insufficient.
“Hi Lary,” John said when he got Lary Blogger on the phone again.
“We’re almost finished with our forecast, but it still looks like we’ll need some equity. I’d like to explore what you said about strategic buyers and financial buyers and see the diagram you mentioned.”
Different Buyers have Different Perspectives
“John, this diagram is only meant as a general overview of some key valuation concepts,” I said when I visited with John at his office a few days later. “It should help you better understand certain key concepts which underlie the valuation of an ownership interest in your company.
The Strategic Buyer will pay the highest premium
“At the top is the Strategic Buyer. In short, he’s looking for more than a simple financial return. (more…)
Nothing in life travels in a neat formation accompanied by bugles and cavalry. A lot of it shows up filthy and unkempt, prominent in the mess we’ve made around our foxhole. These lessons are typically the offspring of hubris, naivete and ignorance … or from overlooking the land mines hidden beneath our feet.
Every Tuesday, we’ll share valuable and practical leadership tips and tools to help you BE a better leader so you can BECOME a better leader. Remember … you won’t BECOME a better leader until you start BEING a better leader … implementing NOW the changes necessary to adopt the proven strategies of successful leaders. You might start by building on the communication matrix and making sure you’re defending the castle to get done what only you can do. Make some time so you’re thinking past today.
It’s Almost Midnight. Do you know where your cash is?
Okay, I admit it, I’m cheating a little this week … but I’ve got a few good reasons. Well, I’m calling them reasons anyway.
For one, I’m working hard to get ready for our Cash Flow Workshop, “It’s Almost Midnight. Do You Know Where Your Cash Is?” scheduled for May 25th. If you live in the San Francisco bay area, are not a financial executive and want to advance your business finance knowledge, our workshop is tailored for you.
Every successful business executive needs a solid grounding in the principles of cash flow … (more…)
“Hi, Lary. I appreciate your coming by to meet in person to talk further about some of the issues we discussed a few weeks ago. Can we talk about valuation first, since that seems to be the foundation for conversations with prospective investors? (more…)
John Wilson, CEO of Ace Business Stuff, was thinking about several of the issues that he discussed earlier that day with his controller, Tom Sampson, and what Tom told him:
“Giving our customers an additional 30 days to pay, relaxing collections and neglecting the sale of inventory already on hand, isn’t a very sound strategy.”
Instinctively, he knew that Tom was right and that whatever bank loan they could obtain, it wouldn’t be enough.
What if bank financing isn’t enough?
Ted Deepockets, his long-time friend, had periodically needled John about the pros and cons of outside investors. He always seemed like he’d be interested in investing if the opportunity was presented. (more…)