Read more about the article Business Finance | Does EBITDA Bury Its Own Dead?

Business Finance | Does EBITDA Bury Its Own Dead?

Does EBITDA really tell you what you need to know?

“I have enough money to last me the rest of my life … unless I buy something.”–         Jackie Mason

 

Does this sound like you?

Someone recently told me that they’re bored by finance. “Don’t distract me with strategic finance stuff, just let me run my business the way I know how.”

“No problem,” I said, “if you’ll just answer one question. What if the way you’re running it is causing increasing strain on your financial resources, cash flow is dwindling and you’re destroying market value every year. Do you care about any of that?”

“Of course, I do, but when sales start picking up again, all of that will go away and my EBITDA will return to normal levels.”

“Really?” I said. “How do you know that?”

“That’s the way it’s always worked.”

“Have you had any problems with your banking relationship?” (more…)

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Vol. 62: Strategic Finance Fundamentals: It’s time!

“If I am through learning, I am through.”– John Wooden

Some of you will remember – back in the day – the E. F. Hutton commercials that intoned, “When E.F. Hutton speaks, people listen.” (Some of you are probably wondering – who is E.F. Hutton in the first place?) These days, the Sage of Omaha has taken their place and has the ear of many. When I finished re-reading Warren Buffett’s Annual Letter to Shareholders, it resonated with similar messages in a number of recent articles.

What is growth?

From a Wall Street Journal article on March 25 discussing Conoco/Phillips’ future plans: “We asked ourselves, ‘What is growth?’” an executive said. “Growth could be viewed as just growing absolute volumes, but we felt that in this challenging environment what’s really important is to grow the value of the company.”

Or this one, from an article in the April 5 edition of Business Week about the Sears/K-Mart merger: “Simplistic analyses … ignore the fact that negative or below-market returns on invested capital are as harmful to creditors as to shareholders.”

Finally, in Warren Buffett’s shareholder letter, (more…)

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Read more about the article Vol 57: Think Strategically!

Vol 57: Think Strategically!

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“The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is asking the wrong questions.”– Peter Drucker

 

I have been working recently with a young CEO-in-waiting who is eager to move into the top spot. He recognizes, however, that his struggle to “think strategically” may be keeping him back. On a tactical level, he is very efficient, discharging the assignments given to him, working his way through his daily action list and dispatching players to their intended destinations. He’s proud of his accomplishments, as he should be, but he “can’t see the lawn for the blades of grass,” and is constantly wrestling with how to develop a strategic perspective.

Ironically, many executives bear a subconscious fear about actually getting to that strategic level. After all, it’s a little harder to figure out what to do than to simply — do. It’s more demanding to establish the flight plan than to follow it. Creating the plan also demands more personal accountability, the conundrum that befuddles so many executives in the first place.

What does it mean to “think strategically?” (more…)

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