led a countywide initiative during and after the financial crisis called Strategic Trusted Advisors Roundtable (STAR). STAR addressed these professional deficiencies that culminated in a higher level of connecting of professionals in order that they might provide a more integrated, holistic, and economically more efficient and effective model of doing good for business clients and fellow professionals.
It also succeeded in enhancing the depth and breadth of each member's service offerings, resulting in higher billings and client caliber. It focuses on deeper relationships versus solely technical knowledge and transactions. I remain a board member and cross the bridge to bring broader perspectives than those limited to business alone.
When I present in public, which I do frequently, many CPAs, attorneys, and wealth advisors tell me that they would like to work with Family Offices. I like to point out, in response, that Family Offices exist, at least in part, because the traditional service models used by CPAs, attorneys, and wealth advisors rarely offer enough value to wealthy families and individuals. Thus, as Carl knows, inadequate value is one reason wealthy families create their own Family Office by taking these functions in-house.
Carl Sheeler is this country's most forward-looking valuation and strategic advisory expert. I dubbed him a “strategic value architect” – a fitting moniker. He gives us a choice: “Do good work for your clients, by only focusing on what they want; or, make a significant contribution to improving your clients' lives by helping them with what they truly need. The choice is ours.” Until then, and after, it is all GRRK™ to me!
Preface
An investment banker introduced me to her attorney friend who had a client whose trust held shares in a 10-figure annual sales distributor. Most of the equity was derived from her mother's passing. Her mother's brother (her uncle) controlled both the company and her trust. Her uncle retained a national appraisal firm to substantiate an unusually low value both for estate tax purposes and to use the value to negotiate a buyout of her brother's and her shares. Both she and her brother, who had his own counsel, felt they were being slighted. They alleged their uncle was underreporting company performance and assets held. They alleged he had breached his fiduciary duty. They were worried about a drawn-out and costly confrontation with their uncle.
They just wanted what was bequeathed to them. This was a six-figure retention, which would balloon to a seven-figure engagement, which would allow me to acquire a dream ranch that offered equine therapy for both veterans and a retreat for business owners as well as well as solitude for my wife to do her art.
This book starts with this story because it sums up nicely how to distinguish between a “check-the-box” analyst who is evaluated by hourly rates and the expert who understands the premium placed upon wisdom and mastery that solves irretraceable problems. Think of Showtimes' Ray Donovan (Liev Schreiber) as a “fixer” of messes (without the gun).
Compare this with a recent communication with an attorney who had expressed on a listserv she felt the four-figure fee for an appraisal was too high after researching appraisal firms on the Internet. The rationale was the client would “know” the right amount because he would accept the buyer's offer. Why spend the money? Counsel was certain she understood fair market value.
I tried to dissuade her from her premise by using the following example: “If the seller was first offered $100,000, but held out and received $200,000, is this the value of the asset?” It may be what it is worth to the seller, but that is not necessarily the value of the asset. The buyer may have more experience and knows the asset is worth $1,000,000. The buyer would have been willing to pay as much as $800,000. So, the “price” differential of $600,000 ($800,000 – $200,000) was money left on the table. And, if the seller had found out? A flawed premise is a transaction between two parties establishes arm's-length value. The analyst is usually retained to identify value, assuming a reasonable exposure and marketing period with knowledge and access to capital under no duress. The notional investors are typically assumed to be a pool of transactions examining both the buy and sell motivations so intrinsic or synergistic value is isolated.
I used another example: “If legal services fees came to $10,000 and the dispute was over property found to be worth $10,000, would the client have overpaid for the services? Conversely, if the fee was $10,000 and the benefit of the dispute was $1,000,000, has the client underpaid?” The point is there is a difference between value, price, cost, and worth.
The examples illustrate that an hourly rate alone only meets the threshold of cost for services, where the value received may not be understood or appreciated by clients. They may commoditize services and will be resistant to fees if nothing above common knowledge is received. The advisor has a duty to articulate the value provided and not solely the price. Otherwise, the advisor is just as likely to minimize fees for services, making no distinction between good and great services.
The optics of the previous examples is understandable because professional services deliver human capital intangibles. What does good look like? This has long been the case for business valuation services. It is in large part why writing this book was important not only to my practice but to all professions and those who retain our knowledge and relationships.
The valuation community is still evolving. Some professionals and their entrepreneurial clients understand the merits of a well-crafted appraisal report with the associated intellectual rigor and research. I salute those who do and who are willing to pay a premium for quality work. This reinforces competence over commoditization.
For the reader who is an appraiser, she or he may be perfectly happy performing more routine work product. For the balance, I shall demonstrate there is more than simply identifying and measuring risk to benchmark business and equity values.
There is a greater calling to provide equity value enhancement (EVE). This is the premise of risk management and opportunity optimization, and the elevated ability to master disputes where risk is mitigated by both measuring the impact of risks existence and then to assist in their minimization or elimination. This is common in matters of alleged value impairment (“damages” and “discounts”).
Our audience is the founders, families, boards, and C-suite of private mid-market through small-cap public companies, private equity, investors, and their trusted advisors. Our goal is to articulate how governance, relationships, risks, and knowledge (GRRK) allows the reader to become a strategic value architect and a chief-of-staff who not only measures but can manage, facilitate, create, and maximize company intangible assets value through the leverage and alignment of human and financial capital. Only then is real value created above the assemblage of tangible assets.
Why GRRK? Successful businesses and entrepreneurial families often see their concentrated wealth as part of an ecosystem of family members, staff, client, vendor, and advisor “constituents.” They do more than consider revenues and profits. They focus on the family's future expectations and harness a culture that goes beyond daily challenges. It's when they are bogged down by the more familiar, yet less productive daily blocking and tackling, that they plateau and often seek to minimize advisory expenditures versus seeking to leverage the advisor's time and talent investment. Protecting their asset becomes defensive versus embracing innovation and remaining on the offensive where reducing risk provides more time and resources to sense and seize opportunity for value growth.
Supersized, stellar growth occurs because these unique executives, founders/families, advisors, and involved constituents foster value creation by harnessing their collective uncommon knowledge and relationships (human capital). This is why those who harness the role of steward, chief-of-staff,
