- In Quotes
No one can be happy until they’ve forgiven their parents. –Konstantin Kisin
No one can be happy until they’ve forgiven their parents.
–Konstantin Kisin
- In Quotes
God is not on the side of the big arsenals, but on the side of those who shoot best. –Voltaire
God is not on the side of the big arsenals, but on the side of those who shoot best.
–Voltaire
- In Quotes
Every prophet has to come from Civilization, but every prophet has to go into the wilderness. He must have a strong impression of a complex society and all that is has to give, and then must serve periods of isolation and meditation. That is the…
Every prophet has to come from Civilization, but every prophet has to go into the wilderness. He must have a strong impression of a complex society and all that is has to give, and then must serve periods of isolation and meditation. That is the process by which psychic dynamite is made.
–Winston Churchill
Building a business is like climbing a mountain. The journey of life, the same. Your trail winds around, up and down over ridge lines, through the valleys. There are overlooks where you stop and view where you came from, and where you’re going. There are…
Building a business is like climbing a mountain. The journey of life, the same.
Your trail winds around, up and down over ridge lines, through the valleys.
There are overlooks where you stop and view where you came from, and where you’re going.
There are markers along the way, helping keep you on track.
You come to forks in the trail, forcing you to choose your next direction.
There’s also crappy weather sometimes, even when you don’t have the right gear. Your boots get soggy, and you feel cold and wet.
And sometimes there are perfectly clear nights where you camp under the stars and, even without amenities, find yourself grateful for the journey.
But the most important part of the climb, by far, is who you take with you.
There are co-hikers and fellow travelers, but those come and go. You hike together for certain stretches of trail, and then they split off on a different path.
You are the only one who walks your own unique trail from start to finish.
But you are not alone. Or, at least, you don’t have to be. For a really successful climb, every hiker needs a trail team.
Your Trail Team is your brain trust. Your council of personal guides. On the trail, they’re with you all the time in spirit – always just a satellite phone call away. Some days, they meet you on the trail for those tough soggy weather slogs and hike alongside to keep you motivated. And when you reach a new milestone, they’re there to celebrate your progress.
Your trail team keeps you safe, and sane, along the journey.
So who is this trail team?
Scientists
First, you need scientists.
Your scientists do your measuring for you. How long you have to go to reach the summit. How far you’ve come. What new gear you need, and what old gear you can get rid of.
They keep you lean and stealth. They keep your heart rate monitor finely-tuned.
Your scientists are your three-headed monster: bookkeeper, CFO and CPA.
These days, there are a lot of ‘fractional’ scientists, who helicopter in but aren’t full-time. And that’s perfectly fine, as long as they’re there when you need them.
Guard
Second, you need a guard.
Your guard holds your funds and makes sure they’re kept safe. He knows the lending landscape in case you need to borrow, and works with your scientists to make sure you’re healthy enough to do so.
Your guard is your banker. Your banker provides security.
Some guards also serve the function of wealth manager, giving you advice on how to invest your excess funds.
The more complicated your journey becomes, the more support you will need from your guard.
Scout
Third, you need a scout.
Your scout provides your eyes and ears on the trail. They hike with you the whole way.
Your scout is your chief of staff.
And while they have other responsibilities to keep you on track, every once in a while you send them off trail to survey the landscape and bring back information.
It’s important for your scout to have access to the rest of your trail team in case of emergencies.
Sherpa
And finally, every mountain climb needs a sherpa.
They’re always there in the background, watching your progress. You share your GPS location with your sherpa so they can always see where you are, even from afar.
Your sherpa is your lawyer.
Your sherpa helps you decide which forks in the road to take, and which to avoid. They help you make clear decisions on those cold crappy weather days when you’re feeling emotional.
And they help you choose your next mountain once you’ve summited the last.
- In Quotes
If you are distressed by anything external, the pain is not due to the thing itself but to your estimate of it. And this you have the power to revoke at any moment. –Marcus Aurelius
If you are distressed by anything external, the pain is not due to the thing itself but to your estimate of it. And this you have the power to revoke at any moment.
–Marcus Aurelius
- In Biz Concepts
I often work with business owners trying to sell their companies. It’s a fun job – always keeping me on my toes. When there’s a lot of money on the line, the juices flow. The stakes are high. It’s the most exciting time in a…
I often work with business owners trying to sell their companies.
It’s a fun job – always keeping me on my toes. When there’s a lot of money on the line, the juices flow. The stakes are high.
It’s the most exciting time in a business’ life cycle, when the equity holders finally get to cash in.
It’s also super stressful for the owners since it’s when everything gets reviewed. All of the business’ operating history is laid bare for buyers to pick over. There’s nowhere to hide. The oversights of the past come to the forefront and need to be contended with.
There’s a life lesson there, too. In life, you pay in the future for corners cut in the past. That part doesn’t just apply to selling companies.
The company sale process is guided by a key principle: The primary objective for any business owner is to maximize the value of their equity. And the value of their equity is expressed through the price paid for the business.
But unlike public companies, whose prices are listed on public exchanges visible to everyone, private company prices are hidden. They’re behind the wall – opaque.
For private companies, early price indications only come to light as a sale approaches. And prices are only made final when the deal closes.
So in order to determine the price, a private business owner has to prepare the business for sale and then create a private market.
A private market requires two key components: (1) Multiple buyers who are making offers, (2) in a concentrated period of time.
First, you need multiple buyers to give yourself optionality. Without multiple offers to reference, you have no comparables on price – and therefore no options.
Sure, you can look up the market multiples of revenue or EBITDA for your industry, and you should. But that’s only one indicator. It provides more of a price range and an indication of overall market conditions rather than the specific value of your business. Remember: Each private company is a singular stand-alone asset, whose value is only truly determined during the lead up to sale within a private market.
Second, to create a private market you need the multiple offers to happen during a concentrated period of time.
Ultimately, that’s what governs a market: time. Or, more specifically, time constraints.
Public markets function because there’s an exchange willing to state prices because they know there are buyers and sellers standing by in real-time ready to transact.
In a private market, you have to create the timing constraints for your buyers yourself. Without the constraints, you can’t value your business properly.
Imagine you receive a soft offer to buy your business in January, and then another offer in July, and then two more before Christmas. It sounds great, four offers! But it’s not all that helpful. The data points are too spread out and disparate. The passage of time destructs your ability to compare and contrast.
What you need is to get all of your potential buyers to make their bids within 30-60 days. Those guardrails on time are what give you a functioning private market.
And without establishing that private market, nearly everything else in the business sale process is secondary. The LOIs, the due diligence, the negotiations and legal paperwork – all secondary to whether you have first established a private market.
The same construct can be applied to a business taking on investment. While not a company sale, you still have to establish the business’ value and therefore need a private market.
And the same construct applies to other business scenarios. For example, if you are a service provider, you need to get multiple prospects to respond to your quotes within a concentrated period of time in order to determine whether you’re charging too much or not enough.
Value is determined in markets. And when there isn’t a public market to find your price, you have to create your own.